Introduction to this report:

Increased competition affects gross profit, and cost rigidity affects net profit, resulting in a shift from profit to loss in 2023. The company changed the direction of its business from quantity to quality, strengthened cost control, and achieved a turnaround in 24Q1.

key points of investment:

maintain the "overweight" rating and lower the target price to 19.1 yuan. Increased competition affected the company's profit in 2023 non-return net profit of -0.125 billion yuan, charging/automotive/battery equipment business to achieve revenue of 1.2/6.3/0.5 billion yuan (YoY-60.2/16.3/113.5%) from profit to loss, performance is less than expected. Considering the slowdown in the laying of power exchange stations, domestic automobile/battery equipment will maintain fierce competition. EPS for 2024-2025 will be lowered to 0.12(-1.78)/0.29(-2.3) yuan, and EPS for 2026 will be increased to 0.56 yuan. Referring to comparable companies and considering that the company has more room for performance, 1.9xPS will be given in 2024, the target price will be lowered to 19.1 yuan, and the "overweight" rating will be maintained.

quality as the focus of the exhibition industry, fee control has achieved initial results, and gross profit margin has recovered from 24Q1. Starting from 2024, the company will shift the focus of its exhibition industry from revenue scale to profit, with gross profit margin increasing by 26.57pct to 28.22 percent month on month. At the same time, the cost control was strengthened, and the period cost rate was reduced to 24.83 percent (QoQ24.24pct), and 24Q1 Company realized a net profit of 0.01 billion yuan (YoY +124.46 percent).

orders confirmed quarterly overlay fee control work, the company's performance is expected to continue to repair.

domestic market extension customer impact gross margin, 2024 the company will focus on expanding high-margin overseas markets. The company expanded Xinwanda and Yiwei lithium energy and other customers, but the domestic automotive/battery/charging market price competition is more intense, the three business gross margin decreased by 12.89/8.34/3.7pct month-on-month, the overall gross margin fell to 20.15 percent (YoY-8.15pct). In 2023, the gross margin of overseas business is 33.86pct higher than that of domestic business, and the company will focus on expanding its overseas battery and automotive electronics business in 2024 to improve gross margin performance.

period expenses front-loaded resulting in net interest rate pressure. Charging and switching equipment needs to reach customers, while battery/automotive equipment is customized products, the company continues to increase sales and research and development investment, the cost rate of 27.51 during 2023 (YoY plus 11.89%), which has a negative impact on performance.

risk tips: 1) order confirmation is less than expected to affect performance; 2) customer returns are less than expected.