Event: The company released its annual report for the year 2023 and the first quarter of 2024. In 2023, the company achieved revenue of 1,827 billion yuan, +59.11% year on year; realized net profit of 147 million yuan, +94.28% year on year, realized net profit of 115 million yuan without return to mother, +71.91% year on year; gross sales margin of 17.79%, -1.13pct year on year, net sales margin 8.14%, year-on-year +1.86pct. On a quarterly basis, 23Q4 achieved revenue of 640 million yuan, +87.69%/+41.55%; realized net profit to mother of 50 million yuan, +486.50%/+97.92% year-on-month, net profit of 30 million yuan after deducting non-return to mother, +719.74%/+19.60% year-on-month. 24Q1 achieved revenue of 566 million yuan, +66.78%/-11.64% YoY; realized net profit of 53 million yuan, +30.18%/+5.86% YoY, net profit of 51 million yuan after deducting net profit of 51 million yuan, +57.80%/+69.01% YoY. The performance was in line with expectations.
Hybrid EGR has increased significantly, and heavy natural gas trucks are booming. In 2023, the company's EGR products and injection systems achieved operating revenue of 562 million yuan, +97.33%. Currently, the penetration rate of domestic hybrid (including growth) models has increased rapidly. The company's hybrid EGR customers cover leading domestic car companies such as BYD, Geely, and Chery. With more targeted customers, the EGR business is expected to continue to increase in 24 years. The company shipped more than 70,000 sets of natural gas injection system assemblies in 2023, accounting for about 50% of the annual sales volume of heavy natural gas trucks in China. According to the upper risk scale, Q1 heavy truck sales volume of 45,300 units, +135% over the same period last year. With the further release of demand for heavy natural gas trucks, the company's natural gas jet air rail products are expected to maintain rapid growth.
The new energy business is growing rapidly, and many popular models of motor cores have been introduced. Against the backdrop of increased competition in the industry, the company's NEV drive motor core business continued to grow rapidly. In '23, the company sold 1.3936 million NEV motor components, +61.28% over the same period. At the same time, it successfully developed a series of direct supply Tier 1 customers to supply popular models such as the M7, M9, and Xiaomi SU7.
Investment advice: Considering the strong demand from downstream customers in the company's EGR+ new energy business, performance is expected to maintain rapid growth. We expect the company to achieve net profit of 230/3.01/364 million yuan in 24-26, +56.7%/+30.6%/+21.1% year-on-year, and EPS of 1.00/1.30/1.58 yuan, maintaining a “buy” rating.
Risk warning: downstream demand falls short of expectations; market development falls short of expectations; industry competition intensifies