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Yangtze Business Daily News● Yangtze Business Daily reporter Shen Yourong

The operating performance of Top Group (601689.SH), a leading platform-based automotive parts company, has once again grown rapidly.

On the evening of July 22, Top Group released its performance report. In the first half of 2024, the company's operating income exceeded 12 billion yuan, and the net profit attributable to the parent company's shareholders (hereinafter referred to as "net profit") exceeded 1.4 billion yuan. Compared with the same period last year, the growth rate exceeded 30%.

In this regard, Top Group explained that the company has been continuously increasing sales and reducing costs based on its established strategy, and has performed well in domestic and overseas markets.

In fact, since 2020, Top Group's operating income and net profit have continued to increase.

In the view of market insiders, the steady growth of Top Group's performance is a concentrated release of its comprehensive competitiveness. In the past few years, the company has actively carried out industrial layout.

The Yangtze Business Daily reporter noted that since 2015, Top Group has fully utilized the function of the capital market, and through fixed increase, convertible bonds, and IPO, the company has raised a total of more than 11 billion yuan. Most of these funds are used for expansion, including the construction of projects such as annual production of 1.2 million sets of lightweight chassis systems and 600,000 sets of automotive interior functional parts.

Today, Top Group has become a leading platform-based auto parts company. Top Group also actively returns to shareholders. From 2018 to 2023, the company's annual dividend rate exceeded 30%.

Revenue and net profit continued to increase

Top Group is about to deliver a brilliant half-year report card.

On July 22, Top Group "spoiled" the news and released its semi-annual performance report. In the first half of the year, the company achieved operating income of 12.227 billion yuan, a year-on-year increase of 33.47%; net profit was approximately 1.452 billion yuan, an increase of approximately 358 million yuan compared with 1.094 billion yuan in the same period last year, a year-on-year increase of 32.69%; net profit after deducting non-recurring gains and losses (hereinafter referred to as "net profit after deducting non-recurring gains and losses") was approximately 1.295 billion yuan, an increase of approximately 268 million yuan from 1.027 billion yuan in the same period last year, a year-on-year increase of 26.06%.

In view of the steady and outstanding performance in the first half of 2024, Top Group attributes it to three factors: First, the company's Tier 0.5 innovative business model continues to be accepted and recognized by customers, the customer base of high-value smart electric vehicle companies with single-vehicle accessories continues to expand, and the customer structure continues to optimize. Second, the product platform strategy continues to advance. Relying on R&D innovation and digital manufacturing capabilities, the company's comprehensive competitiveness in interior functional parts, lightweight chassis, and thermal management businesses continues to improve, and sales revenue maintains steady growth; orders for automotive electronic products begin to increase in volume, and closed air suspension systems, smart electric door systems, etc. achieve rapid growth after mass production. Third, the internationalization strategy is accelerating. The Mexican factory is advancing rapidly, and the first factory of the first phase of the project has been put into production, and the other three factories are advancing in an orderly manner. The ball-jointed forged aluminum control arm won the BMW project order, laying the foundation for expanding the European market.

In fact, in addition to the above three factors, the company's active and continuous efforts to reduce costs and increase efficiency is also an important factor.

In the first quarter of 2024, the company's operating income and net profit were 5.688 billion yuan and 645 million yuan, respectively, a year-on-year increase of 27.29% and 43.36%.

In the first quarter, the company's comprehensive gross profit margin and net profit margin were 22.43% and 11.39%, respectively, up 0.58 percentage points and 1.23 percentage points year-on-year.

In recent years, Top Group's operating income and net profit have maintained sustained growth.

From 2020 to 2023, the company's operating income was RMB 6.511 billion, RMB 11.463 billion, RMB 15.993 billion, and RMB 19.701 billion, respectively, up 21.50%, 76.05%, 39.52%, and 23.18% year-on-year. In three years, operating income more than doubled. In the same period, the company's net profit was RMB 628 million, RMB 1.017 billion, RMB 1.7 billion, and RMB 2.151 billion, respectively, up 37.70%, 61.93%, 67.13%, and 26.49% year-on-year, an increase of about 2.43 times in three years.

The above data show that since 2020, Top Group's operating performance has shown a good momentum of sustained rapid growth.

Customers cover mainstream automobile brands

The continued growth in Top Group's operating performance is related to its strong competitiveness.

Founded in 1983, Top Group has been dedicated to the automotive industry for more than 40 years. The company has four major business divisions: power chassis system, trim system, Yuxiang Intelligent Driving and electric drive. It mainly produces shock absorption systems, interior and exterior systems, lightweight body, chassis systems, intelligent cockpit components, thermal management systems, air suspension systems, intelligent driving systems and actuators.

Since entering the A-share market through IPO in 2015, Top Group has continued to expand its production.

In 2015, the company raised 1.468 billion yuan through its IPO, and the funds were used to invest in projects such as an annual production of 2.6 million sets of automotive shock absorbers, an annual production of 800,000 sets of automotive sound insulation parts, and to supplement working capital.

In 2017 and 2021, the company implemented two private placements, raising 2.395 billion yuan and 2 billion yuan respectively, which were used for the construction of automotive intelligent braking system projects, automotive electronic vacuum pump projects, light alloy subframe projects, and automotive lightweight chassis system projects.

In 2022, the company raised 2.5 billion yuan through the issuance of convertible bonds to be used for the construction of a lightweight chassis system project with an annual output of 1.5 million sets and a lightweight chassis system project with an annual output of 3.3 million sets.

On January 30, 2024, the company once again completed a private placement, raising 3.515 billion yuan to be used for Chongqing's annual production of 1.2 million sets of lightweight chassis systems and 600,000 sets of automotive interior functional parts projects, Ningbo Qianwan's annual production of 2.2 million sets of lightweight chassis systems projects, etc.

So, with such intensive expansion, is Top Group too aggressive? In the 2023 annual report, the company stated that based on the company's new orders and the prediction of the future penetration rate of new energy vehicles, the company will continue to implement capacity layout. Hangzhou Bay Phase VI and Phase VII and Chongqing Factory, Huzhou Factory, Anhui Shouxian Factory, about 1,100 acres of factories have been completed and put into production one after another. Hangzhou Bay Phase VIII, Phase IX, Xi'an Factory, and Mexico Factory have also accelerated planning and implementation. The investment and construction of factories will bring certain cost pressures in the short term, but the new energy vehicle industry is currently in a period of rapid development. Although car companies have a certain production capacity, the parts supply chain has not followed up in time. Therefore, the company's capacity expansion is based on rigorous analysis and scientific decision-making, and has a strong foresight.

Top Group has a number of well-known corporate customers. According to disclosures, the company has established good cooperative relations with many domestic and foreign automobile manufacturers and has become a global partner of automobile manufacturers such as Audi, BMW, Stellantis, GM, Geely, Ford, Mercedes-Benz, Volkswagen, Ideal, NIO, Xiaopeng, RIVIAN, and LUCID.

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