Event: on October 28, the company released three quarterly reports, achieving revenue of 854 million yuan, + 10.7% year-on-year,-13.0% month-on-month, deducting non-return net profit of 5 million yuan, year-on-year + 412.3%, month-on-month + 88.5%.
Avatar volume to promote steady revenue growth, profitability repair
The company's 23Q3 achieved revenue of 854 million yuan, + 10.7% year-on-year and-13.0% compared with the same period last year. The steady increase in revenue is mainly due to: 1) the solid foundation of the traditional steel wheel business; 2) the incremental contribution of Avatar, driving the performance to continue to rise.
The company's 23Q3 achieved a comprehensive gross profit margin of 9.86%, basically the same as the same period last year, with a month-on-month increase in 2.3pct compared with the end of 2022. We believe that the main reason is the increase in the sales share of high-margin Avatar products and the optimization of sales structure. The expense rate during the 23Q3 period of the company is 9.00%, year-on-year-1.8pct, month-on-month + 3.0pct, the year-on-year decrease is mainly due to the improvement of management and sales expenses, and the month-on-month increase is mainly due to the increase in R & D investment and financial expenses.
The company Q3 achieved a net profit of 9 million yuan, + 59.5% year-on-year, + 98.9% compared with the same period last year; deducting the non-return net profit of 5 million yuan, + 412.3%, and + 88.5%, the profitability was greatly improved.
Multiple factors drive the company's future performance to grow at a high speed.
1) Avatar products drive the high growth of the company's light wheel business. Avatar has the advantages of both steel wheels and aluminum wheels, and is expected to replace aluminum wheels in the field of passenger cars and steel wheels in the field of commercial vehicles. 2) the new production line is gradually completed. At present, the company has 5 production lines in Fuyang, Hefei and Nanning, with a total annual production capacity of 5 million, with a target of 10 million in 24 years (source: 2021). 3) large-scale to drive the profitability of Avatar. Avatar has supplied the head heavy truck and trailer mainframe factory in the commercial vehicle field, and the passenger car field has obtained the designated projects of the mainframe factory such as BYD, Zero run, Changan, GM and so on (source: company announcement). The gross profit margin of Avatar products is higher than that of traditional products, and the profit is gradually released with the increase of scale.
Investment suggestion
We estimate that from 2023 to 2025, the company will achieve an operating income of 3.44 billion yuan and a net profit of 0.18 million yuan and a net profit of 181 million yuan. Considering that the production capacity, revenue and profit of the company's new product Avatar wheel business are in the stage of rapid growth, we give the company a 12-month target price of RMB8.4 per share and a "Buy-A" rating corresponding to 2023 PE 2024 PE in 2025.
Risk tips: Avatar promotion is not as expected, capacity construction is not as expected, raw material prices fluctuate.