Key points of investment

Incident details: On the evening of April 18, the company disclosed its 2023 annual report. In 2023, the company achieved operating income of 3,913 billion yuan, an increase of 16.62% over the previous year; net profit attributable to the parent company was 497 million yuan, an increase of 11.05% over the previous year.

At the same time, the company announced a profit distribution plan for 2023. It plans to distribute a cash dividend of 8.2 yuan (tax included) for every 10 shares to be transferred from the capital reserve fund to all shareholders by 3 shares.

The company's 2023 performance grew steadily, in line with market expectations; however, due to the high amount of impairment reserves this year, the net profit growth rate was slightly lower than the revenue growth rate. In 2023, the company achieved operating income of 3,913 billion yuan, a year-on-year increase of 16.62%, and achieved net profit attributable to the parent company of 497 million yuan, an increase of 11.05% over the previous year. 1) The company's revenue grew steadily in 2023, with the NEV business contributing an important increase in performance growth. Benefiting from the continued boom in the NEV industry, the company's core customer Tesla's Shanghai plant reached a cumulative delivery volume of 947,000 vehicles in 2023, an increase of 33% over the previous year. Delivery volume of ideal vehicles reached 376,000 units, an increase of 182.2% year on year, and NIO Auto delivered 160,000 units, an increase of 30.7% year on year; the total sales revenue from the NEV customers mentioned above accounts for more than 50% of the company's revenue. 2) In 2023, the company's preparation for asset loss and credit loss provisions was large, making the net profit growth rate slightly lower than the revenue growth rate. Due to the principle of prudence, in 2023, the company calculated asset impairment loss preparation of 33.3588 million yuan (mainly fixed assets specific to customer products, such as molds, jigs, inspection tools, etc.) and calculated credit impairment loss preparations of 57.024,200 yuan (bad debts in the auto parts business); if the impact of these impairment loss preparations was excluded, the company's profit before tax increased 25.00% year-on-year in 2023.

The year-on-year growth rate of 2023Q4's net profit in a single quarter slowed further. 2023Q4 achieved revenue of 1,166 billion yuan, a year-on-year increase of 21.01%, an increase of 20.83 percentage points over the third-quarter revenue growth rate; achieved net profit of 110 million yuan in a single quarter, a year-on-year decrease of 17.09%, and a further decrease of 23.42 percentage points from the third quarter. The year-on-year decline in net profit from 2023Q4 is mainly due to the fact that most of the 2023 asset impairment loss preparations and credit impairment loss preparations totaled 903.83 million yuan; of which 72.2615 million yuan was accrued in the fourth quarter, including asset impairment losses of 24.2998 million yuan and credit impairment losses of 479.617 million yuan; if the impact of these impairment loss provisions is excluded, the company's profit before tax increased by 30.90% year on year in 2023Q4.

Based on the booming development of the NEV industry, the company is actively speeding up the layout of the new integrated die-casting circuit, and the performance is expected to stabilize and improve. At present, China's NEV production and sales continue to grow rapidly. According to statistics from the China Association of Automobile Manufacturers, China's NEV sales volume from January to January 2024 was 2.09 million units, an increase of 31.8% over the previous year. Based on the booming development of the NEV industry, considering that integrated die casting is more in line with the lightweight development needs of new energy vehicles, the company laid out production capacity related to integrated die casting ahead of schedule in the second half of 2020, purchased a 6100T cold room horizontal die casting machine in the early stages, and built an integrated die-casting plant and production line earlier; up to now, the company has deployed 4 integrated die-casting production lines, including Yancheng Duoli's 6100-ton integrated die-casting production line; at the same time, in order to strengthen its pioneering advantage in the field of integrated die-casting, in September 2023, the company also plans to Jiangsu Jintan continues to lay out an integrated die-casting production line. The project is expected to achieve annual sales of 1.7 billion yuan after delivery.

At the customer level, the company has already placed mass production orders related to the integrated die-casting business; according to the company's announcement in September 2023, Kunshan Daya, a wholly-owned subsidiary, has received a letter of intent from a leading domestic NEV manufacturer to provide them with integrated die-cast floor parts. According to customer plans, the above project is expected to begin mass production in 2025, with an estimated total sales amount of about 21-23 billion yuan during the life cycle.

Investment advice: The company's 2023 performance is basically in line with expectations; looking ahead to 2024, the NEV industry is expected to maintain its prosperity. Combined with the gradual implementation of the company's integrated die-casting project and supporting production capacity, the company's business is expected to stabilize and improve. In the long run, the company is one of the earliest domestic companies engaged in the production of automotive stamping parts. It is deeply tied to new energy vehicle companies such as Tesla and Ideal, or will benefit from the accelerated penetration of new energy vehicles in the future. At the same time, along with the trend of lightweight automobiles, large-scale applications of integrated die-casting are expected to begin, which is beneficial to the company's sustainable development.

We expect total revenue for 2024-2026 to be 4.888 billion yuan, 5.738 billion yuan, and 6.312 billion yuan respectively, with year-on-year growth rates of 24.9%, 17.4%, and 10.0% respectively; corresponding net profit to mother will be 637 million yuan, 758 million yuan, and 855 million yuan respectively, with year-on-year growth rates of 28.3%, 19.0%, and 12.7% respectively; corresponding EPS will be 3.47 yuan, 4.13 yuan, and 4.65 yuan respectively. The corresponding PE is 9.9x, 8.4x, and 7.4x, respectively, covered for the first time. Give an increase in holdings -A rating.

Risk warning: NEV industry prosperity risk, risk caused by uncertainty in NEV development, risk of new business expansion falling short of expectations, macroeconomic and industrial policy risk, risk of high customer concentration, risk of raw material price, risk of technological innovation, risk of market competition, etc.