Incident: 1) The company released its 2023 annual report. In 2023, the company achieved operating income of 4,070 billion yuan, an increase of 26.42% over the previous year; realized net profit of 320 million yuan, a year-on-year decrease of 20.68%. 2023Q4 achieved operating income of 928 million yuan, a year-on-year decrease of 18.45% and a year-on-month decrease of 13.47%; realized net profit of 0.28 million yuan, a year-on-year decrease of 84.63% and a year-on-year decrease of 71.07%. 2) The company released its 2024 quarterly report. 2024Q1 achieved operating income of 555 million yuan, down 42.84% year on year and 40.19% month on month; realized net profit to mother of -0.19 million yuan, down 120.83% year on year and 168.73% month on month.

In 2023, the photovoltaic and automotive industries experienced relatively rapid growth, while the security and consumer electronics industries declined. Driven by major domestic customers such as SolarEdge, Enphase, and BYD, the company's photovoltaic and new energy vehicle industry achieved rapid growth in 2023. In 2023, the company's photovoltaic industry achieved revenue of 2,362 billion yuan, a year-on-year increase of 33.30%; the automotive industry achieved revenue of 1,189 billion yuan, an increase of 49.30%; the security industry achieved revenue of 361 million yuan, a year-on-year decrease of 0.86%; and the consumer electronics industry achieved revenue of 117 million yuan, a year-on-year decrease of 50.25%.

The auto industry's gross margin declined significantly in 2023, dragging down the overall profit level. 1) In 2023, the company's comprehensive gross profit margin was 18.87%, down 2.86pp from the previous year, mainly affected by changes in product structure. In 2023, the company's photovoltaic industry achieved a gross profit margin of 23.10%, an increase of 1.40pp; the automotive industry achieved a gross profit margin of 12.50%, a year-on-year decrease of 7.84pp, mainly due to intense competition in the industry; and the security industry achieved a gross profit margin of 6.37%, a year-on-year decrease of 4.34pp. 2) The cost ratio for the 2023 period was 10.32%, with a year-on-year increase of 2.24pp, with sales/management/R&D/finance expenses ratios +0.24pp/+1.01pp/+0.73pp/+0.27pp, respectively. 3) The company's net interest rate in 2023 was 7.85%, down 4.66pp year on year.

The company's domestic and foreign supporting capabilities are constantly improving. The company currently has 8 production bases in China, of which the new production sites in Jiangxi and Anhui were put into operation one after another at the end of 2022. In 2023, the deployment and construction of overseas production bases will be accelerated. The company has successively set up production bases in Mexico and Hungary, and has been put into operation one after another, improving supporting service capabilities for overseas core customers.

Profit forecasting and investment advice. The company's net profit for 2024-2026 is estimated to be 389 million yuan, 4.86 million yuan, and 604 million yuan, respectively, and net profit to mother will maintain a compound growth rate of 24% over the next three years. The company is a leading domestic one-stop multi-process precision structural parts enterprise and maintains a “holding” rating.

Risk warning: risk of fluctuating raw material prices; risk of increased market competition; risk of large accounts receivable and inventory size, etc.