Event: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company's revenue was 11 billion yuan, +30% year on year; net profit to mother was 610 million yuan, +60% year over year; gross sales margin was 21.6%, and net sales margin was 6.4%. 2024Q1, the company's revenue was 2.97 billion yuan, +16% year over year; net profit to mother was 190 million yuan, +51% year over year; gross sales margin was 21.6%, and net sales profit margin was 7.1%.

Strong demand in the commercial vehicle industry+increased passenger car market share, and the company's revenue grew rapidly. The company has an excellent customer structure, including NEV customers covering BYD, NIO, Xiaopeng, etc.; commercial vehicle customers cover Cummins, Sinotruk, FAW Jiefang, etc. In 2023 and 2024Q1, the company's revenue growth was mainly due to: 1) Commercial vehicles: Consumer market demand picked up. In 2023/2024Q1, domestic sales reached 403/1.03 million units, respectively, +22%/+10% year-on-year. 2) Passenger vehicles: The penetration rate of new energy vehicles increased. In 2023/2024Q1, domestic NEV sales were 950/2.09 million units, respectively, +38%/+32% compared to the same period last year. At the same time, the company's market share continues to increase, reducing the impact of downstream customer sales fluctuations on performance, and operating steadily.

Operating efficiency continued to improve, and the company's net sales margin increased sequentially in 2024Q1. 2024Q1, the company's gross sales margin decreased slightly by 1 pct month-on-month, mainly due to an increase in raw material prices; net sales margin increased 0.8 pct month-on-month, mainly due to strict cost reduction and fee control to improve operating efficiency. On the cost side, the company's sales, management and R&D expenses rates were 2.4%/5.3%/4.6%, respectively, +0.2/+0.1/+0.1pct year over year, and -1.4/-0.4/+0.8pct, respectively. Among them, sales management expenses declined, mainly due to the company continuing to promote cost reduction and efficiency and strengthen cost control.

Develop new business+global layout to open up future development space. In 2024, the company's revenue target is 13 billion yuan, aiming to reach 13.5 billion yuan, and the net profit margin to mother will reach more than 6%. Business growth comes from:

1) Develop new businesses: In 2023, the National Development and Reform Commission and other departments proposed that by the end of 2025, various types of new computing power in national hub node regions will account for more than 60% of the country's new computing power. At present, the company's data center server liquid cooling business has achieved customer breakthroughs. 2) Global layout: In 2023, the company's newly acquired projects will increase annual revenue of more than 6.1 billion yuan after delivery during the life cycle, of which international orders amount to 2.6 billion yuan, accounting for 42%. With the increase in territorial production capacity, orders from international customers have accelerated markedly.

Profit forecast and valuation: The company's net profit for 24-26 is estimated to be 8.8/11.4/1.4 billion yuan, respectively, and the corresponding PE is 19/14/12 times, respectively.

Risk warning: Downstream sales fall short of expectations, industry competition intensifies, and customer development falls short of expectations.