Incident: On April 8, 2024, Changying Precision announced its results forecast for the first quarter of 2024. It is estimated that Q1 will achieve net profit of 250-350 million yuan, turning a year-on-year loss into a profit; net profit after deducting non-return to mother of 105-135 million yuan, turning a year-on-year loss into a profit. Furthermore, on March 18, 2024, the company released its 2023 annual report. In 2023, it achieved revenue of 13.722 billion yuan, -9.74% year over year; net profit to mother was 86 million yuan, +102.23% year over year.

24Q1 operating profit level and expectations, share transfer to enhance performance. The company expects to achieve net profit of 250-350 million yuan in 24Q1, of which net profit after deduction of non-return to mother is expected to turn a profit of 105-135 million yuan, mainly due to the continuous recovery of the consumer electronics and new energy markets. Major international and domestic customers are mass-producing and delivering important new projects, and revenue is +30% year-on-year, a record high for the first quarter. The impact of 24Q1's non-recurring profit and loss was about 180 million yuan; the main reason was that the company transferred 30% of Guangdong Tianji Intelligent Systems Co., Ltd.'s shares and relinquished Tianji Smart's priority subscription rights for this capital increase, increasing 24Q1 profits.

The company's revenue declined throughout the year of '23 due to changes in consumer electronics and new energy sources and weak demand for terminals, but there was a slight month-on-month recovery in Q4. Net profit returned to the mother doubled in '23, mainly due to: 1) the production capacity of the new energy components business continued to be released and capacity utilization increased; 2) exchange rate changes had a positive impact on the company's performance.

Deeply involved in the three major fields, the development of consumer electronics is improving. In the field of consumer electronics, the company is deeply tied to Apple, benefiting from its technological innovation. On the Mac side, MacBook Air's M3 series products were officially launched in March 2024, which is 60% faster than models equipped with the M1 chip. The M3 chip has now been downgraded to the Air series, which is expected to increase product sales. On the Vision Pro side, the launch of Vision Pro is expected to drive the development of the MR industry. The Apple Vision Pro precision structural parts project in which the company participated was successfully mass-produced in the fourth quarter of '23; in addition to core customers, MR products for the company and multiple customers are in the R&D stage. Furthermore, in '23, the company cooperated with several customers on titanium alloy products, and the product is expected to grow rapidly in '24. Among them, the Samsung AI phone S24 series was released in January '24, and the company is its core supplier of exterior parts.

Production capacity continues to be released, and the new energy business is growing steadily. The company mainly develops, produces and sells battery structural parts, high-voltage electrical connections, hydrogen fuel cell bipolar plate products, etc. used in new energy vehicles and energy storage. In terms of production capacity, the company's domestic production bases are mainly located in Suzhou, Changzhou, Yibin and Zigong, Sichuan, and Ningde, Fujian; overseas production bases are distributed in Vietnam, Mexico and the United States. On the customer side, the company maintains good and in-depth cooperation with T customers, mainly providing busbars and car interior parts; T customers' revenue has continued to grow in recent years, and it is expected that revenue will increase further after production is put into operation at overseas bases. With the gradual release of production capacity at domestic and foreign production bases and the increase in capacity utilization, it is expected that the scale of revenue will continue to grow rapidly and profits will gradually recover.

Investment advice: The company's performance and profits are gradually recovering. We expect the company's net profit to be 682/7.33/875 million yuan in 24-26, corresponding to the current PE price of 19/17/15 times. The company is a leader in precision manufacturing, and the layout is perfect, maintaining a “recommended” rating.

Risk warning: Vision Pro shipments fell short of expectations, industry competition intensified, and customer verification fell short of expectations.