Incident: (1) The company released its 2023 annual report. In 2023, the company achieved revenue of 17.244 billion yuan, +15.63% year on year, net profit of 1,131 million yuan, +16.78% year on year; net profit after deducting non-return to mother of 977 million yuan, +28.60% year on year, of which Q4 achieved revenue of 4.47 billion yuan, -3.95% year on year; net profit without return to mother of 250 million yuan, +62.14% year on year. (2) According to the company's 2024 quarterly report, 2024Q1 achieved revenue of 4.692 billion yuan, +21.58%/+4.96%, respectively; net profit to mother of 361 million yuan, +37.56%/+41.20% year-on-month, respectively; net profit without deducted net income of 302 million yuan, +40.48%/20.88% year-on-month, respectively.
Revenue side: The company's revenue in 2023 was 17.244 billion yuan, +15.63% year-on-year. By business, the intelligent chassis system business - the air suspension system business achieved revenue of 822 million yuan, +20.13% year over year; gross profit margin was 22.74%, +1.31 pct year on year. AMK, a subsidiary of the company, is a high-end supplier of air suspension systems. It is the world's top OEMs such as Jaguar Land Rover, Volvo, Audi, Mercedes-Benz, and BMW, as well as a supplier of many new domestic car builders and traditional independent brands. As of the 2023 annual report release date, the company has received a total order output value of about 12.1 billion yuan. Its subsidiary Dingyu Technology focuses on the R&D and production of air springs. In April 2024, air springs and gas storage tank products received a project target of 1,418 billion yuan.
Intelligent chassis system business - lightweight chassis systems and rubber business achieved revenue of 5.524 billion yuan, +21.33% year over year; gross profit margin of 15.48%, -1.82 pct year on year. The company's forged aluminum control arm chassis lightweight assembly products have made breakthrough progress. The ball hinge assembly products of its subsidiary, Sichuan Wangjin Company, are the core safety components and performance components of the chassis system. They are technologically advanced and have a high technical threshold. It has received orders from various OEMs such as Mercedes-Benz, Changan, Guangzhou Automobile, and BYD. In 2023, the lightweight business received a total of approximately 8.5 billion yuan in orders. The cooling systems business achieved revenue of 5.186 billion yuan, +19.91% year over year; gross profit margin was 16.47%, +0.12pct year over year. The company's subsidiary, German TFH, is an excellent supplier of engine and new energy vehicle battery thermal management pipeline assembly products. It has its own patented exclusive production technology, the creatube process, and the core technology for TPV hoses and nylon tubes. Currently, it has been equipped for new energy vehicle platforms such as BMW, Volvo, Audi, Volkswagen, Geely, Xiaopeng, and Ideal. The subsidiary Zhongding Fluid actively lays out the development and production of thermal management system assemblies and core component products. The thermal management system business received a total of approximately 12 billion yuan in orders in 2023. The sealing systems business achieved revenue of 3.634 billion yuan, +14.18% year over year; gross profit margin of 26.04%, +0.48 pct year over year. Its subsidiaries KACO from Germany, COOPER from the US, and ACUSHNET from the US have the top three sealing system technologies in the world. It has successfully developed supporting products such as high-performance new energy motor seals, new energy battery module sealing systems, and electric bridge assemblies to support new energy vehicle platforms such as Volvo, NIO, SAIC, and GAC. The sealing business is a high-tech barrier industry. The reliability requirements are extremely high, and it has the highest technical level in the global sealing industry. Other businesses achieved revenue of 2,078 billion yuan, -4.14% year over year, gross profit margin of 45.12%, and +12.59pct year over year.
Gross profit side: In 2023, the company's gross profit margin was 21.95%, +1.08pct year-on-year. Mainly due to the increase in gross margin of air suspension systems, rubber business, cooling systems, sealing systems, and other businesses, the revenue share of air suspension systems/lightweight systems/rubber business/cooling systems/sealing systems/other businesses in 2023 was +4.77%/+11.15%/+20.88%/+30.07%/+21.07%/+12.06%, compared with +0.18%/+3.65%/-2.49%/+1.07%/-2.49%/-2.49% of each business share structure. OK.
Profit side: Net profit to mother in 2023 was 1,131 billion yuan, +16.78% year-on-year. The company's expense rate for the 2023 period was 14.11%, +0.35pct year-on-year. Specifically, the company's sales/management/finance/R&D expenses rates were 2.83%/5.76%/0.98%/4.54%, respectively, with year-on-year changes of +0.15pct/-0.19pct/+0.
At 29pct/+0.11pct, management expenses were well controlled, and interest expenses increased by 108 million yuan, +85.80% over the same period last year, driving up financial expenses. Net profit for 23Q4 was 256 million yuan, +17.02% YoY and -25.83% YoY. The 2024Q1 company's sales/management/finance/R&D expenses rate was 2.50%/5.20%/1.48%/4.58%, respectively, +0.001pct/+0.004pct/+0.33pct/-0.04pct. Net profit for 24Q1 was 361 million yuan, +37.56% year over month, +41.20% month on month; net margin was +0.91 pct/+2.06pct month on month, and the company's cost control results gradually became apparent.
Focus on intelligent chassis systems, promote the company's business in the direction of intelligence, promote cost control and fine management of overseas business, and promote the development of traditional business and incremental business of air suspension, lightweight chassis, and thermal management systems. R&D investment in 2023 was 783 million yuan, +18.42% YoY. The company focuses on the three major businesses of intelligent chassis systems, cooling systems, and sealing systems, and continues to develop steadily around the goals of “global modular management, technological iterative upgrading, and industrial reinforcement”. The field of lightweight chassis has the core technology of ball hinge assemblies. In the field of thermal management, the company has its own patented exclusive production technology, the creatube process, and the core technology of TPV hoses and nylon tubes, and the company ranks among the top two in the world in its segment. Overall, the company's contract debt in 2023 was 89 million yuan, up 95.29% from the beginning of the period, and inventory was 3.509 billion yuan, up 6.95% from the beginning of the period, providing order support for revenue recognition in 2024. We believe that with the company's technological competitiveness and strong demand for downstream new energy vehicles, the company's revenue is expected to continue to grow steadily.
Investment suggestions and profit forecasts: (1) The smart chassis and thermal management layout is ready to go; the three major incremental business orders are sufficient; (2) the company is a leader in the field of sealing, air suspension, etc., and the technology has high entry barriers (3) the company's global resource integration has entered the fulfillment period, and overseas cost control and refined management have improved.
It achieved impressive results in 2023. With the deepening of the company's layout in the field of new energy and the advancement of localization projects such as Anhui Amico and Anhui Testone, the company has huge room for growth. The company's revenue for 2024-2026 is estimated to be 200.04, 228.74, and 25.941 billion yuan respectively, with growth rates of 16.0%, 14.4%, and 13.4%, and net profit to mother of 13.92, 15.72, and 1,846 billion yuan in that order, with growth rates of 23.0%, 12.9%, and 17.5%, corresponding to PE 12.3, 10.9, and 9.2 times. The first coverage gives an “gain” rating.
Risk warning: Sales volume of supporting models falls short of expectations; risk of fluctuations in raw material prices; development of new products falls short of expectations; development of new customers falls short of expectations.