Incident: The company released its 2023 report and its quarterly report for '24. It achieved revenue of 1.09 billion yuan, +22.3% year on year; net profit to mother of 162 million yuan, +32.3% year on year; gross profit margin of 25.8%, +2.3pp year on year; net profit margin of 14.6% year on year, +1.1 pp year on year. 24Q1 achieved revenue of 299 million yuan, +45.8% year-on-month, and -17.7% month-on-month; net profit to mother of 44 million yuan, +96.3% year-on-year, and -17% month-on-month, all in line with the previously announced performance forecast range.

Sales volume from major customers increased, and profitability remained steady: in '23, the sales volume of the company's major customers all increased. Among them, Changan +8.8%, BYD +62%, GAC +39.7%, and Geely +17.7%, and the company's operations rebounded quarter by quarter. Automobile cooling system hoses sold 42.0912 million units in '23, -12.6% year on year, 40.233 million automotive fuel system hoses, +26.7% year on year, sales of 8.585 million pieces of automotive accessory systems and brake hoses, +19.2% year on year, motorcycle hoses and others sold 53.4583 million pieces, +4.1% year over year. The 23Q4 gross profit margin was 25.4%, +2.2pp year on year, -1.9pp month-on-month, net profit margin 14.7%, +3.8pp year on year, and +0.1pp month-on-month, maintaining steady growth.

The share of new energy continues to rise, and the number of cooperative customers continues to grow: in '23, the company's new energy customers accounted for 31.6%, +4.8pp compared to the previous year. Currently, the company has a customer base of more than 50 automobile OEMs, more than 50 motorcycle manufacturers, and hundreds of secondary suppliers. In terms of new energy, the company and BYD (Dynasty series, Ocean series, etc.), GAC Aian (AION series, etc.), Wuling (MiniEV, etc.), BAIC New Energy (Jihu, etc.), Changan New Energy (Deep Blue, Avita, etc.), Jinkang Celis (Genjie M series, etc.), Geely New Energy (Linker, Jikrypton, etc.), Dongfeng New Energy (Lanzhou, etc.) etc.), and automobile manufacturers such as Ideal Intelligent Manufacturing have established long-term and stable cooperative relationships The share of new energy sources is expected to continue to rise.

Production capacity continues to expand, and there is great potential for growth in new fields: the company's “incremental (manufacturing) capacity expansion” project was designed to add 10,000 tons of hose production capacity, with a design capacity of 2 billion yuan. The first phase 101, 102 workshops and public engineering workshops were put into production in 22 years, and the second phase 103 and 104 workshops were put into use at the end of 23; the 105 and 106 workshops are under construction, and are expected to be completed and put into production and use in 24 years. The company actively expands liquid cooling pipelines used in energy storage, electricity, data centers, etc., and pipeline systems in rail transit, oil and gas exploration, ships and other markets, enriching product categories, expanding product applications, and continuously cultivating new growth points for future revenue.

Profit forecasting and investment advice. The company's 2024-2026 EPS is expected to be 1.01/1.23/1.43 yuan respectively, corresponding PE is 17/14/12 times, and net profit CAGR to mother is 24.1%, maintaining a “buy” rating.

Risk warning: competition increases risk; risk of customer development falling short of expectations; risk of rising raw material prices, etc.