The company specializes in new energy vehicle high voltage power supply systems, leading the industry in technical indicators such as power density. The company's main business includes vehicle high voltage power supply systems and non-vehicle high voltage power supply systems such as liquid-cooled supercharged pile power modules.

Vehicle high voltage power supply systems are mainly 3-in-1 and 2-in-1 products, which are the main source of the company's revenue. According to the company's prospectus, the sales revenue of the company's two-in-one and three-in-one systems in 2023 was 0.47 billion yuan and 1.3 billion yuan respectively, -12.8% and +34.1% year-on-year respectively; gross margins were 24.4% and 25.3%, respectively, up year-on-year. The company's products lead the industry in key technical indicators such as conversion efficiency, power density, reliability and level of integration. The power density of the vehicle high voltage power supply system can reach 3.2 kW/L.

During the customer restructuring period, the company's performance in the first three quarters was under pressure. 2024Q3's total revenue was 0.52 billion yuan, -0.2% YoY; cumulative revenue for the first three quarters was 1.18 billion yuan, -15.3% YoY. 2024Q3 net profit to mother was 0.02 billion yuan, or -35.4% YoY; cumulative net profit to mother for the first three quarters was 0.08 billion yuan, -13.6% YoY. The company's performance for the first three quarters of 2024 was under pressure. We judge that it was mainly due to customer restructuring and the year-on-year decline in demand for terminals from major customers such as GAC Group and Easyjet: in 2023, GAC and Easyjet were the company's top three customers, accounting for 56.2% and 9.6% of revenue respectively.

The number of high-quality customers is imminent, and there is plenty of space to go out to sea. The company's high-quality customers continue to be introduced. In 2023, Xiaopeng entered the company's top five customers. The company mainly sells 2-in-1 system products to Xiaopeng Motors. 2024Q1, the company achieved mass production of supporting projects for Xiaomi cars. According to the official account of Xiaomi Auto, the Xiaomi SU7 is expected to complete the annual delivery target of 0.1 million units ahead of schedule in November. The company has also obtained targets for some models such as BYD, Ledao, and Zero Sport, and some projects have been mass-produced in the second half of 2024. In terms of going overseas, the company and Renault have achieved mass production of projects, and have also targeted projects with customers such as Stellantis and a mainstream European luxury brand. We judge that high-quality domestic customers are in the product release period. At the same time, Europe is facing the 2025 carbon emissions assessment year, and the growth rate of overseas trams is expected to increase markedly. Domestic+overseas is expected to gradually expand in 2025, driving the company's revenue and profit to grow rapidly.

Investment advice: We expect the company's net profit to be 0.1/0.14/0.18 billion yuan in 2024-2026, respectively, and the corresponding EPS of 0.87/1.28/1.62 yuan, respectively. We believe that strong demand for domestic trams will be compounded by the European carbon emission assessment, and that the overall growth rate of trams will be relatively rapid. At the same time, the company's high-quality domestic and foreign customers are in the product release period, and sales growth is expected to drive the company's scale up rapidly. Referring to comparable companies, the company was given 35-40 times PE in 2025, corresponding to a reasonable value range of 44.92-51.34 yuan. It was covered for the first time, and the company was rated “superior to the market”.

Risk warning: Subsidies for trams have declined, European carbon emissions assessments have slowed, and price competition has intensified.