Event Overview: The company released its 2023 annual report: In 2023, the company achieved revenue of 1,353 billion yuan, an increase of 11.7% year on year; net profit to mother was 201 million yuan, up 42.2% year on year; net profit after deducting non-return to mother was 181 million yuan, an increase of 32.5% year on year. With 2023Q4, the company achieved revenue of 406 million yuan, up 24.1% year on year and 9.1% month on month; net profit to mother of 63 million yuan, up 50.1% year on year and 11.4% month on month; net profit after deducting 58 million yuan, up 46.1% year on year and 16.3% month on month.

Comment: The company's operating performance is good, and the profit level continues to rise ① Volume: The company's sales volume increased year-on-year in 2023. The company sold a total of 160,700 tons of products in the metal products industry in 2023, an increase of 19.57% over the previous year.

② Price: The company's gross margin increased year-on-year. The company will continuously adjust the product structure according to market changes and the needs of major customers to appropriately increase the proportion of high-margin products. In 2023, the company's gross margin was 25.36%, up 3.76pct year-on-year. 2023Q4, the company's gross margin was 25.69%, up 0.51 pct year on year and 0.83 pct month on month.

Future core focus: seize high-quality customer resources and actively expand production capacity ① Demand for auto parts continues to grow, and the field of fine drawn steel applications continues to expand. With the increase in automobile consumption in China and the increase in bicycle usage under the trend of weight reduction, demand for precision stamped steel is expected to continue to be boosted. In addition, in recent years, domestic demand for precision stamping parts in non-automotive sectors such as cutting tools and construction machinery has also maintained a relatively rapid growth rate.

② Master high-quality customer resources and have sufficient orders in hand. The company has high-quality customer resources, and the company has established long-term stable cooperative relationships with Schaeffler, Mubel, Magna, Faurecia, and many other well-known domestic and foreign auto parts suppliers. In emerging application fields, the company has now entered the core customer industry chain in the bearing field, and is also actively exploring emerging application fields such as core component materials, sensor materials, and hydrogen energy core equipment materials for humanoid robots.

③ Seize demand to release opportunities and actively expand production capacity. In 2023, the company's production capacity was 160,000 tons, and the production capacity scale is in the first tier of the domestic industry. The new Anhui plant project is expected to be completed by the end of 2024 and officially put into operation in 2025. It is expected to release 40,000 tons of production capacity that year. In the long run, the two plants in Anhui and Suzhou will be able to provide a total production capacity of 300,000 tons.

Investment suggestions: The future production capacity of Xianglou New Materials will be further increased, the product structure will be optimized, and the operation is steady. We expect the company's net profit to be 2.27, 2.64, and 322 million yuan respectively in 2024-2026, corresponding to the current price. PE is 14/12/10 times, respectively, maintaining the “recommended rating”.

Risk warning: risk of fluctuations in raw material prices, risk of cycle fluctuations in the automotive industry, risk of high supplier concentration.