Incident: The company released its 2024 semi-annual report: in the first three quarters of 2024, the company achieved revenue of 1.234 billion yuan, a year-on-year increase of 45.86%; achieved net profit of 0.153 billion yuan, an increase of 39.92% over the previous year; achieved net profit deducted from non-mother of 0.144 billion yuan, an increase of 45.08% year on year.

24Q3 revenue exceeded expectations, and stabilizer revenue grew rapidly. 24Q3 achieved revenue of 0.527 billion yuan, a year-on-year increase of 53.37%; realized net profit of 0.072 billion yuan, a year-on-year increase of 58.39%; and realized net profit without deduction of 0.068 billion yuan, an increase of 76.11% year-on-year. By dividing the business segment, suspension spring revenue in the first three quarters was about 0.67 billion yuan, and stabilizer revenue was about 0.39 billion yuan. Among them, suspension spring revenue increased 30% year on year, and stabilizer bar revenue increased 138% year on year. The company's revenue volume in the third quarter was mainly due to a sharp increase in stabilizer revenue.

The scale effect was compounded by the release of production capacity, and gross margin increased steadily. 24Q3 achieved gross profit margin of 26.68%, +1.17pct/month-on-month, +4.52pct; achieved net profit margin of 14.53%, and +1.04pct/+4.03pct month-on-month, respectively. The company's gross margin increased. On the one hand, the scale effect caused by the continued increase in suspension spring revenue; on the other hand, the gross margin improvement brought about by the continuous release of stabilizer production capacity.

Production capacity was released in an orderly manner, and product market share increased steadily. The company enhances its overall competitiveness and steadily increases its product market share. The company predicts that by the first three quarters of 24, the suspension spring market share would have exceeded 26%, and the stabilizer bar market share would have exceeded 12%. At the same time, the company is actively expanding production capacity to support downstream customers, focusing on the Henan and Chongqing factories, while optimizing the production capacity layout of the Zhuji factory area to guarantee performance growth.

Actively cooperate overseas and seek the path of internationalization. The company continues to communicate with joint ventures and foreign enterprises, and will start cooperating with Stellantis for the first time in 2023. In August 2024, the company announced that the company will participate in the auction for some assets under MSSC AHLE GmbH by purchasing a subsidiary as the acquirer. The company plans to use no more than 20 million euros of self-raised capital and own capital to purchase these assets and subsequent construction of the subsidiary. The company is exploring overseas development paths, which is expected to promote the company's international upgrading.

Investment advice: The company has been deeply involved in the field of springs for many years and has an excellent customer structure. In view of the continued release of the company's production capacity, we have increased the revenue growth rate of some of the company's products. We expect the company's revenue in 2024-2026 to be 1.78/2.29/2.83 billion yuan, corresponding to net profit of 0.22/0.29/0.37 billion yuan, and the current market value corresponding to 2024-2026 PE is 17.7/13.3/10.3, maintaining a “buy” rating.

Risk warning: Prices of raw materials have risen, production capacity has fallen short of expectations, customer expansion falls short of expectations, and sales of new energy vehicles have fallen short of expectations.