Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 3.129 billion yuan, +5.37% year over year; realized net profit of 356 million yuan, -19.64% year over year; realized deducted non-net profit of 348 million yuan, +19.66% year over year. In 2024, Q1 achieved revenue of 1,040 million yuan, +68.77% year over month; realized net profit of 162 million yuan, +244.43% year on year, +48.77% month on month; realized deducted non-net profit of 151 million yuan, +252.06% year over year, and +34.20% month on month.

24Q1 performance exceeded expectations year-on-year, and automotive connector shipments grew at a high rate: mobile phone terminal customer orders declined markedly in the first half of '23, and orders rebounded in the second half of the year. As a result, the company's annual revenue remained basically the same as last year. The company's revenue increased dramatically in Q1 in '24, mainly because orders for automotive connectors were full and sales continued to grow; demand for consumer electronics picked up, and the pace at which terminal manufacturers picked up goods increased quarterly. By product in 2023, RF connectors and cable components/electromagnetic compatibility parts/soft boards/automotive connectors/other main business revenue was 7.99/7.96/3.11/8.23/ 400 million yuan, respectively, -8.48%/-1.04%/-23.72%/60.06%/+7.96%. The company's gross margin in '23 was 32.38%, +0.68pct year on year; the company's net margin was 11.78%, -3.98 pcts year on year. The company's gross margin in Q1 '24 was 35.31%, +3.58pcts year on year, +4.05pcts month on month; net margin was 15.94%, +8.48pcts year on year, +4.00pcts month on month. The net profit elasticity of 24Q1 is higher than revenue, and the share of revenue mainly from high-margin automotive connectors and other products continues to rise. In terms of expenses, throughout 2023, the company's sales, management, R&D and financial expenses rates were 3.40%/8.77%/9.47%/-0.75%, respectively. The year-on-year changes were -0.02/-0.37/+0.55/+0.22pct, respectively. The overall cost rate was well controlled.

Benefiting from the volume of leading automotive customers, the automotive business is expected to continue to grow at a high rate: 24Q1's automotive connector shipments continue to grow, overall production capacity continues to expand, and scale effects are gradually showing. At present, the company has a complete range of automotive connector products. The main types of products are RF Fakra board end & line end, HDCamera connector, high speed Ethernet connector, HSD board end & line end, vehicle USB, etc. It has had rich mass production experience. Many leading domestic car customers have successfully introduced it, and have entered the supply chain of major domestic automobile manufacturers such as Geely, Great Wall, BYD, Changan, Chery, and Ideal, and has achieved large-scale shipments. Since 2023, the company has carried out verification work among new automotive customers. Currently, the main products supplied to them are non-Fakra and some other Ethernet products, such as HDcamera connectors. The company's automotive-side high-frequency connectors and high-speed connectors have good adaptability to the performance parameters of major international manufacturers, and the response speed is fast, and can meet their customized needs. The company's non-Fakra and Ethernet products are introduced by more customers, which is conducive to increasing the company's share. On the one hand, we are optimistic that the automotive industry will continue to thrive, and the company is expected to continue to benefit from increased sales from core customers. On the other hand, with the rapid growth in demand for new energy Ethernet high-speed connectors, the company's automotive connector business is expected to usher in a period of performance fulfillment.

Consumer electronics demand is recovering, and BTB is expected to show flexibility: from the perspective of consumer electronics customers, the company has entered the global mainstream smartphone brand supply chain and has become a core supplier for world-renowned smartphone companies such as Xiaomi, OPPO, Vivo, Samsung, Honor, ZTE, and Huawei. According to IDC data, domestic smartphone shipments were 69.26 million units in 24Q1, +6.5% year-on-year. Thanks to strong shipments from manufacturers such as Honor and Huawei, the overall Android market was boosted by +9.3% year-on-year. Shipments from domestic mobile phone brands continue to grow, and the pace of picking up goods is gradually recovering. As the company's main supplier of Android mobile phone terminals, especially Chinese mobile phone terminal customers, the consumer electronics business is expected to grow steadily. In 23 years, through continuous and in-depth cooperation with leading customers, the BTB business has gradually matured, the overall product structure has been optimized, and rich experience in mass production has been accumulated. Among them, the company's RF BTB products have been used in batches for core customers and have achieved a good market response; ordinary BTB products have increased their layout and introduction among leading customers, and the expansion has been smooth. The company is expected to achieve revenue growth in LCP cables and RF BTB-related products in '24. At the same time, it will expand product production capacity and increase production capacity reserves for ordinary BTB products. The company's BTB business is expected to show great flexibility.

First coverage, giving an “additional” rating: The company specializes in technical research, design, manufacturing and sales services for products related to miniature electrical connectors and interconnection systems, POGOPIN products, and PCB soft board products. The company is a leading domestic RF connector company. Among them, miniature RF connectors have reached the same technical level as world-class connector manufacturers. The products are widely used in smart mobile terminal products represented by smartphones, as well as emerging products such as connected car terminals and smart home appliances. In recent years, the company has actively expanded automotive connectors and successfully introduced them into the supply chains of major domestic automobile manufacturers such as Geely, Great Wall, BYD, Changan, Chery, and Ideal. On the one hand, the automotive industry is expected to continue to boom, and the company will benefit from the continuous increase in sales volume and share of leading car customers; on the other hand, the penetration rate of new energy vehicles and advanced intelligence are increasing, driving the demand for related high-speed Ethernet connectors. The company's automotive electronics business is expected to enter a period of high growth in performance. In terms of consumer electronics, industry demand continues to recover, and domestic mobile phone manufacturers such as Honor and Huawei are showing strong market performance. As the main supplier of domestic Android mobile phone brands, the company's consumer electronics is expected to grow steadily, benefiting from increased customer mobile phone shipments. The company's net profit for 2024-2026 is estimated to be 655 million yuan, 888 million yuan, and 1,097 million yuan, EPS 1.55, 2.06, and 2.60 yuan/share, respectively, and PE 27X, 20X, and 16X respectively in 24-26.

Risk warning: Consumer electronics demand falls short of expectations, automobile customer sales fall short of expectations, market competition heightens risks, and the penetration rate of intelligent driving falls short of expectations.