Key points of investment

The Q3 results were in line with expectations. The company's 24Q1-3 revenue was 4.4 billion yuan, up 21%, net profit to mother was 0.3 billion yuan, up 3%; gross profit margin was 19.7%, up 1.1 pct; net interest rate to mother was 6.8%, same decrease of 1.2 pct; of these, 24Q3 revenue was 1.6 billion yuan, +19%/13% year over month, net profit to mother 0.08 billion yuan, +6%/-21% year on month, gross profit margin 18.1%, +0.1/-3.8pct, net profit margin 5.1% YoY -0.6/-2.2pct.

The share of power supplies remained stable, the electric drive business began to be released, and the first to mass-produce wireless charging. Looking at vehicle power supplies, the company's Q1-3 revenue was 3.6 billion yuan, accounting for 84%, corresponding to shipments of 1.6 million units, and the third party supply market share remained stable and maintained the first place. Among them, Q3 earned 1.3 billion yuan, shipped 0.6 million units, an increase of 20%, direct+indirect exports accounted for 27%, and an increase of 2 pct. We expect vehicle power supplies to be shipped 2.5 million units throughout the year, an increase of 25%. The company added Audi pure electric models and the Great Wall Popular models, such as the Ledao L60, etc., are expected to increase its market share in 25 years; in terms of electric drives, the company's Q1-3 revenue is 0.5 billion yuan, accounting for 11%, an increase of 8 pcts, of which all-in-one revenue is 0.29 billion yuan, an increase of 376%, benefiting from car companies' demand for cost reduction and the rapid release of related products; in addition, the company also broke through mass production of wireless charging, and was first equipped with the Zhiji L7, leading the technology industry.

The product structure continues to be optimized, and profitability is expected to increase after 25 years of overseas customers. According to our estimates, the average price of Q1-3's vehicle power supplies is 2,275 yuan/unit (excluding tax), of which the average price of H1 is 2,300 yuan/unit (excluding tax), and the average price of Q3 is 2,195 yuan/unit (excluding tax), which decreased month-on-month. Mainly due to European customers taking vacations, shipments from major overseas customers decreased. With the resumption of overseas product shipments and subsequent increases of 800V products, the average product price is expected to pick up; on the profit side, the overall gross profit margin of Q3 is 18.1%, a slight increase over the previous year, due to changes in product structure, the impact of domestic and foreign product gross products. Interest rates are stable, With the sharp cost reduction of fourth-generation products and an increase in production capacity utilization, the overall gross margin remained 20% + for 24 years, corresponding to a net profit margin of 4-8%. In addition, the company has been supplying the three major Stellantis platforms in 25 years, and the sales volume of mid-size vehicles on the M platform is obvious. As a result, the share of overseas customers has increased, and the profit level is expected to increase further.

Expense ratios have declined, and operating cash flow is impressive. The company's expenses for the 24Q1-3 period were 0.5 billion yuan, with an increase of 32%, an expense rate of 12%, and an increase of 1 pct, of which the Q3 period cost 0.2 billion yuan, +12%/+5%, the cost ratio was 11.9%, -0.7/-0.9pct; 24Q1-3 net operating cash flow was 0.36 billion yuan, a decrease of 36%, of which Q3 operating cash flow was 0.35 billion yuan, +50%/+138% year on month; 24Q1-3 capital expenditure 0.2 billion yuan, a decrease of 44%, including Q3 capital expenditure of 0.05 billion yuan, -71%/+29% year over month; inventory at the end of 24Q3 was 1.1 billion yuan, down 8.5% from the beginning of the year.

Profit forecast and investment rating: Considering weak sales demand in Europe, we lowered the company's net profit from 24-26 to 0.52/0.63/0.75 billion yuan (originally estimated 0.63/0.77/0.93 billion yuan), up 3%/22%/19%, corresponding to 20/17/14 times PE. Considering that the company is a leading automotive power supply company, we maintained a “buy” rating.

Risk warning: technology iteration risk, market competition risk, raw material price fluctuation risk.