On June 29, the company issued a performance forecast that it is expected to achieve a net profit of RMB 6.14-711 million in the first half of 2021, a year-on-year increase of + 90% to RMB 120%, of which the net profit in the second quarter is RMB 3.76-473 million, which is 94.6% higher than that of the same period last year. Compared with the previous year, the month-on-month ratio was + 57.5% and 98.2%, exceeding market expectations. The company is a global supplier of high-quality automotive interior and metal parts, with high-quality customers; the restructuring of the European business is progressing steadily, and the loss of overseas assets continues to be reduced, which is expected to usher in valuation restructuring. According to the performance forecast, we raise the company's 2021 EPS forecast to 1.87 yuan (the original 1.79 yuan), maintain the company's 2022 EPS forecast of 2.14 yuan 2.48 yuan, and maintain the "buy" rating.

The company issued a 2021H1 performance forecast, exceeding market expectations. On June 29, the company issued a forecast of results for the first half of 2021. It is estimated that 2021H1 will achieve a net profit of RMB 6.14-711 million, a year-on-year increase of + 90% to RMB 120%, including a net profit of RMB 3.76-473 million in the second quarter, which is 94.6% higher than that of the same period last year, and a quarter-on-month profit of + 57.5% and 98.2%, which exceeds market expectations. In the case of lack of core and low prosperity in the industry, the company's performance in the second quarter still achieved substantial growth compared with the previous quarter, except for the income from equity investment of about 7000-80 million yuan, mainly due to the company's good customer structure and the smooth progress of the European restructuring plan. business rebounded steadily. We believe that with the continuous penetration of the company's customers and the continued restructuring of overseas loss-making assets, the company's business is expected to continue to pick up.

With the continuous expansion of thermoforming business, the demonstration effect of Tesla supporting interior parts is obvious. The company's interior accessories business takes a two-pronged approach both at home and abroad: in terms of domestic business, the joint venture company Sheng Weidehe Huaxiang currently supplies rearview mirror products of Model 3 models made in Tesla Shanghai Super Factory. In terms of overseas business, Northern engraving, a subsidiary of Lawrence Interior Decoration, a wholly owned subsidiary of the company, cooperated with Tesla in North America, supporting Model X, Model S aluminum ornaments and other products. It is expected that as a supplier in Tesla's global supporting system, the company will have the opportunity to obtain more products in its core interior product business area in the follow-up Model Y model. At the same time, the subsidiary Changchun Huaxiang thermoforming business is deeply equipped with FAW-Volkswagen, with high added value and good downstream sales performance of core customers, the company is expected to benefit obviously.

The loss of the European business continues to decline, which is bound to show confidence in development. The company continued to promote the restructuring of the German factory, reached a layoff compensation agreement with the German local trade union in 2020, planned to close the main factory in Huaxiang, Germany, and agreed to lay off staff. We believe that continued losses in German factories are a drag on the company's overseas performance, which is expected to fundamentally solve the drag on losses in the European region. In the first half of 2021, the company's overseas losses decreased significantly. Through the integration of European factory resources and the shift of manufacturing focus to low-cost areas, the company will continue to improve the efficiency of operation and management, raise the level of net profit, and the performance level is expected to be significantly improved. At the same time, the company's fixed growth to major shareholders is progressing smoothly, and we are confident about the future development of the company. We believe that the reduction and increase of business losses in Europe are progressing smoothly, and the company is expected to usher in valuation restructuring.

Risk factors: global car sales are not as expected; overseas business restructuring is not as expected; the progress of additional issuance projects is not as expected; Tesla's supporting expansion is not as expected.

Investment suggestion: the company is a high-quality supplier of global excellent automobile interior and exterior decoration and metal parts, supporting mainstream customers such as Tesla, Volkswagen, Mercedes-Benz and BMW; the new business thermoforming metal parts production line reaches production one after another and contributes to the performance. After the major shareholders increase their shares in the future, it will help to optimize the corporate governance structure; the company's European business restructuring is progressing steadily, overseas loss-making assets are expected to be divested, and the company is expected to usher in valuation restructuring. According to the performance forecast, we raise the company's 2021 EPS forecast to 1.87 yuan (the original forecast is 1.79 yuan), maintain the company's 2022 EPS forecast of 2.14max 2.48 yuan, give the company an industry average valuation of 15xPE in 2021, raise the target price to 28.05 yuan, and maintain the "buy" rating.