Key points of investment

Key points of the announcement: The company released its 2023 annual report and 2024 quarterly report. The 2023 annual report was slightly lower than our expectations, and the 2024 quarterly report exceeded expectations. In 2023, we achieved revenue of 17.2 billion yuan, +16% year over year; realized net profit of 1.13 billion yuan, +17% year over year; realized net profit without deduction of 980 million yuan, +29% year over year. 2024Q1's revenue was 4.69 billion yuan, +22%/+5% year on month, net profit to mother was 360 million yuan, +38%/+41% month on month, net profit after deducting non-return to mother was 300 million yuan, +40%/+21% year on month.

The infrastructure business grew steadily, and the progress of the idle business exceeded expectations. In 2023, the company's air suspension system/lightweight/rubber business/cooling system/sealing system revenue was 8.2/19.2/36.0/51.9/3.63 billion yuan respectively, +20%/+14% year over year. Among them, the air suspension business received the most attention. After the acquisition of AMK, the company accelerated the introduction of the air suspension industry chain into the country, and received orders from many new domestic car builders and leading traditional independent brands. As of the 2023 annual report, the company's domestic air suspension business had received a total order output value of about 121 billion yuan, about 12.1 billion yuan. Among them, the total output value of assembly product orders is about 1.7 billion yuan. Dingyu Technology, a subsidiary of the company, is committed to breaking through technical barriers for products such as air springs and magnetorheological shock absorbers. It has successively announced that it has been designated as air suspension system assembly products from a domestic new energy brand OEM and a leading independent brand OEM, and has made a major breakthrough in the air suspension business.

Profits from overseas assets have been recovered at an accelerated pace, and the profit center is gradually rising. 1) Gross profit margin. The company's gross margin in 2023 was 22.0%, +1.1 pct year on year. Overseas merger and acquisition projects were implemented at an accelerated pace in China. In 2023, the net interest rates of the subsidiaries Wuxi Jiake/ Anhui Weigu/ Anhui Tesitong were +1.9pct/+4.3pct/-0.3pct, respectively. 2) Expense rate. The cost rate for the company period in 2023 was 14.11%, +0.36pct year on year, of which sales expenses rate/ management expense rate/ R&D expense rate/ financial expense ratio were 2.83%/5.76%/4.54%/0.98%, respectively, +0.15pct/-0.11pct/+0.28pct, respectively. 4) In other categories, 2023Q4 asset impairment loss/credit impairment losses were respectively -0.37/ -017 million yuan, which was a large month-on-month accrual amount. At the same time, the 2024Q4 company's fair value change earnings were -52 billion yuan. Combined with the above categories, Q4 performance was slightly lower than expected.

The 24Q1 scale effect was highlighted, and profits exceeded expectations. The gross margin of the 2024Q1 company was 22.42%, +1.6pct/-0.9pct compared to the same period, with an expense ratio of 13.8% compared to the same period, and +0.3pct/-1.3pct compared to the same period. The net profit margin for the 24Q1 company was 7.7%, and +0.9pct/+2.0pct compared to the same period.

Profit forecast and investment rating: Considering the rapid pace of release of the suspended business, we raised the company's 2024-2025 revenue forecast to 199/22.8 billion yuan (originally 182/21 billion yuan), and estimated operating income of 26 billion yuan in 2026, +16%/+15%/+14%; maintain the 2024-2025 net profit forecast of 13.3/1.54 billion yuan, and expect net profit to mother of 1.74 billion yuan in 2026, +18%/+15%/+13%, corresponding PE to 13/11 /10x, maintaining a “buy” rating.

Risk warning: Passenger car production and sales fall short of expectations, and air suspension promotion falls short of expectations.