Event Overview: On August 25, 2023, the company announced the 2023 semi-annual report. 2023H1 achieved revenue of 7.5 billion yuan, an increase of 3.9% over the previous year; net profit from the previous year was 320 million yuan, a year-on-year decrease of 9.1%. Among them, 2023Q2 achieved revenue of 3.89 billion yuan, an increase of 4.3% over the previous year; net profit of return to the mother was 95 million yuan, a year-on-year decrease of 45.7%.

Business performance is impressive, and goodwill calculation affects current profits. The main reason for the decline in net profit attributable to 2023H1 is the estimated impairment of Wuxi Xiongwei's goodwill of 149 million yuan. Excluding the impact of impairment of goodwill, net profit attributable to shareholders of listed companies increased 33.31% year-on-year. By business, 2023H1's lightweight business achieved revenue of 6.23 billion yuan, a year-on-year decrease of 2.1%. Among them, the aluminum alloy wheel business achieved revenue of 3.64 billion yuan, a year-on-year decrease of 1.9%; the magnesium alloy business achieved revenue of 2.03 billion yuan, a year-on-year decrease of 3.9%. The company had sufficient orders for lightweight automotive metal parts during the reporting period, and overall sales volume increased year on year, but due to the year-on-year decline in prices of the main raw materials aluminum ingots, magnesium ingots, and steel, the operating income decreased year on year. The general aviation aircraft business achieved revenue of 1.28 billion yuan, an increase of 48.6% over the previous year. The gross margin of 2023H1 was 20.9%, up 2.6 pct from the previous year. Among them, the gross profit margin of the automobile lightweight business was 20.4%, up 3.9 pct from the previous year, and the gross margin of the general aviation aircraft business was 23.3%, down 8.1 pct from the previous year. The 2023H1 company's expenses rate for the period was 10.9%, an increase of 0.2 pct over the previous year. Among them, the sales expense ratio, management expense ratio (including R&D), and financial expense ratio were 1.4%, 7.9%, and 1.5%, respectively, with year-on-year changes of -0.1 pct, +0.6 pct, and -0.3 pct, respectively. The main reason for the increase in management expense rates is the increase in employee wages and benefits and the increase in expenses associated with managing business.

Go to battle lightly and focus on a twin-engine strategy. The company focuses on the “dual engine” development strategy and is committed to becoming a global promoter of lightweight automotive metal parts and a global leader in innovative manufacturing of general aircraft. Among them, in the automotive lightweight field, the company will continue to focus on the leading application advantages of metal components such as magnesium alloy and aluminum alloy in the lightweight industry segment, and further increase investment in lightweight metal application technology dominated by magnesium alloy and aluminum alloy. As a leader in the lightweight magnesium alloy body segment, the company continues to accelerate the popularization of the application of large instrument panel brackets in domestic high-end vehicles and new energy vehicles; and promotes the localized application of large-scale die-casting parts such as magnesium alloy side doors, interior door panels, rear hatchback doors, and interior door panels. In the field of general aviation aircraft, the company's general aviation aircraft manufacturing business has sufficient orders, sales business continues to be optimized, delivery of new models with high added value, and after-sales service business is steadily improving.

Investment suggestions: We expect the company to achieve net profit of 81/11.6/1.4 billion yuan in 2023-2025. The current market value corresponding to PE in 2023-2025 is 15/11/9 times, respectively. The company's lightweight business card is new energy and is welcoming a period of rapid development; the aircraft business has benefited from increased demand and steady development in the training market. Maintain the “Recommended” rating.

Risk warning: Risks such as a slowdown in macroeconomic growth; implementation of policies in the automotive industry falling short of expectations; increased competition in the NEV market; and falling short of expectations in advancing aviation policies.