In 2023, the company achieved operating income of 3.257 billion yuan, a year-on-year decrease of 15.28%. Among them, the PC and smart terminal structural parts\ communication electronics\ mold business achieved revenue of 27.89\ 2.57\ 170 billion yuan respectively, a decrease of 12.84%\ 23.58%\ 31.02%, accounting for 85.62%\ 7.88%\ 5.22% of total revenue; in 2023, the company achieved net profit of 0.27 billion yuan, a year-on-year decrease of 82.99%, of which net profit after deducting non-return to mother was 20 million yuan, a year-on-year decrease of 82.99% 90.07%; in 2023, the company's gross sales margin was 15.28%, down 1.67 pcts year on year, and net sales margin was -0.06%, down 3.56 pcts year on year.

Actively responding to the changing environment, the company's performance continues to recover. Since the second half of 2022, the laptop industry has been impacted by short-term decline in demand. The company's management responded positively, continuously improved management efficiency, and optimized business layout. Judging from a single quarter, the company's net profit loss to mother in the fourth quarter of 2022 was continuously repaired. The company lost 41 million yuan in net profit in the first quarter of 2022, narrowed to 29 million yuan in the first quarter of 2023, and quickly reversed losses in net profit to mother in the second quarter of 2023. The company's gross margin for the fourth quarter of 2023 was 18.52%, only 0.22pct less than the third quarter of 2022.

AIPC has driven a wave of switching, and the laptop business has entered a boom cycle. In the second half of 2023, the trend of recovery in the laptop industry gradually became clear, and due to the wave of AI models, major terminal brands launched their own AIPC development and commercial promotion plans, and AIPC became a new point of contention for laptop brands. According to the “AIPC Acceleration Plan” announced by Intel, it is expected that more than 100 million AIPC units will be launched by 2025. According to IDC's forecast, AIPC's new machine assembly ratio in the Chinese PC market is expected to increase from 8.1% in 2023 to 54.7% in 2024. At the same time, Windows 12 will also be launched in 2024, which will bring huge switching demand, and the company's PC and smart terminal structural parts business will resume new growth.

The amount of magnesium alloy used in new energy vehicles is increasing, and the automobile business is expected to become the company's second growth pole. According to China's “Energy Saving and New Energy Vehicle Technology Roadmap” plan, the amount of magnesium alloy used in bicycles in China will reach 45 kg by 2030, accounting for 4% of the total vehicle weight. It is estimated that by 2030, the demand for magnesium alloy die castings in the Chinese automobile market will reach 1.31 million tons, with an average compound growth rate of 13.2% in 2020-2030. The company has been deeply involved in the field of structural parts for many years, and has accumulated a wealth of magnesium-aluminum processes. It is also proficient in equipment use and supporting technology in “semi-solid injection molding” technology. The company's automobile business has entered the mass production stage, orders continue to be stable, production capacity continues to be released in the Hefei Deep Project, and downstream products cover various new energy models such as Xiaomi, NIO, Xiaopeng, and BMW.

First coverage, giving a “buy” rating. The company's revenue for 2024-2026 is estimated to be RMB 41.63/45.104 billion, and net profit to mother is RMB 2.10/2.84/321 million, respectively, and the corresponding PE is 18.29/13.54/11.97, respectively.

Risk warning: downstream laptop shipments fall short of expectations, automotive structural parts business development falls short of expectations