China Automotive Systems Inc (CAAS) 2023 Q1 法說會逐字稿

Greetings. Welcome to the China Automotive Systems First Quarter 2023 Conference Call. (Operator Instructions) Please note this is being recorded.

問候。歡迎參加中國汽車系統2023年第一季度電話會議。 （操作員說明）請注意，該信息正在被記錄。

I will now turn the conference over to your host, Kevin Theiss. You may begin.

現在我將把會議交給主持人凱文·泰斯 (Kevin Theiss)。你可以開始了。

Thank you, everyone, for joining us today. Welcome to China Automotive Systems' 2023 First Quarter Conference Call. Joining us today are Mr. Jie Li, Chief Financial Officer of China Automotive Systems. He will be available to answer questions later in the conference call with the assistance of translation.

謝謝大家今天加入我們。歡迎參加中國汽車系統2023年第一季度電話會議。今天加入我們的是中國汽車系統首席財務官李傑先生。他稍後將在翻譯的幫助下在電話會議上回答問題。

Before we begin, I will remind all listeners that throughout this call, we may make statements that may contain forward-looking statements. Forward-looking statements represent the company's estimates and assumptions only as of the date of this call. As a result, the company's actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the Risk Factors in the company's Form 10-K annual report for the year ended December 31, 2022, as filed with the Securities and Exchange Commission and in other documents filed by the company from time to time with the Securities and Exchange Commission.

在我們開始之前，我將提醒所有聽眾，在整個電話會議中，我們可能會發表包含前瞻性陳述的聲明。前瞻性陳述僅代表公司截至本次電話會議之日的估計和假設。因此，由於多種因素，包括公司截至 12 月 31 日的 10-K 表格年度報告中風險因素中描述的因素，公司的實際結果可能與這些前瞻性陳述中包含的結果存在重大差異， 2022 年，如向美國證券交易委員會提交的以及公司不時向美國證券交易委員會提交的其他文件中所述。

If the outbreak of COVID-19 is not effectively and time controlled, our business operations and financial condition may be materially and have reflected as a result of a deteriorating market outlook for automobile sales to slow down the regional national and international economic growth, weakened liquidity and financial condition of our customers or other factors that we cannot foresee.

如果 COVID-19 的爆發不能得到有效和時間控制，我們的業務運營和財務狀況可能會受到重大影響，並已反映出汽車銷售市場前景惡化、區域國內和國際經濟增長放緩、流動性減弱的結果我們客戶的財務狀況或我們無法預見的其他因素。

Any of these factors and other factors beyond our control to an adverse impact on the overall business environment cause uncertainties in the regions where we conduct business, so our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations. A prolonged disruption or any further unforeseen delay in our operations of the manufacturing, delivery and assembly processes within any of our production facilities could continue to result in delays in the shipment of products to our customers, increased costs and reduced revenue.

任何這些因素和我們無法控制的其他因素都會對整體業務環境產生不利影響，從而導致我們開展業務的地區存在不確定性，因此我們的業務會以我們無法預測的方式受到影響，並對我們的業務和財務狀況產生重大不利影響和經營結果。如果我們任何生產設施內的製造、交付和裝配流程的運營發生長期中斷或任何進一步不可預見的延誤，可能會繼續導致向客戶運送產品的延誤、成本增加和收入減少。

The company expressly disclaims any duty to provide updates to any forward-looking statements made in this call, whether as a result of new information, future events or otherwise.

該公司明確表示不承擔對本次電話會議中所做的任何前瞻性陳述進行更新的義務，無論是由於新信息、未來事件還是其他原因。

On this call, I will provide a brief overview and summary of the first quarter results for the period ended March 31, 2023. Management will then conduct a question-and-answer session. This 2023 first quarter results are unaudited and are reported using U.S. GAAP accounting. For the purposes of our call today, I'll review the financial results in U.S. dollars.

在本次電話會議上，我將提供截至 2023 年 3 月 31 日的第一季度業績的簡要概述和摘要。管理層隨後將進行問答環節。 2023 年第一季度業績未經審計，並使用美國公認會計準則會計報告。為了今天的電話會議，我將回顧以美元計算的財務業績。

We will begin with a review of the recent dynamics of the Chinese economy, the automobile industry in our market position. China's GDP growth rebounded to 4.5% year-over-year in the first quarter of 2023 from 2.9% growth in the fourth quarter of 2022 and compared with 4.8% in the first quarter last year.

我們首先回顧一下中國經濟的近期動態以及汽車行業在我們市場中的地位。中國GDP同比增速從2022年第四季度的2.9%回升至2023年第一季度的4.5%，而去年第一季度的增速為4.8%。

Retail sales grew by 5.8% year-over-year in the first quarter of 2023, with a surge in the month of March to 10.6% year-over-year as lockdowns and other COVID restrictions have been eliminated. Industrial production grew by 3.9% year-over-year in the month of March, increasing from 2.4% in the January, February time period.

2023 年第一季度零售額同比增長 5.8%，隨著封鎖和其他新冠疫情限制措施的取消，3 月份的零售額同比飆升至 10.6%。 3月份工業生產同比增長3.9%，高於1、2月份期間的2.4%。

Investment in infrastructure construction grew by 8.8% year-over-year in the first quarter of 2023 and manufacturing investment rose by 7%, according to statistics from Chinese Bureau of Statistics. However, investment into the important property development segment declined by 5.8% year-over-year.

據中國統計局統計，2023年一季度，基礎設施建設投資同比增長8.8%，製造業投資增長7%。然而，重要的房地產開發領域的投資同比下降5.8%。

Automobile sales in China continued to be weak in the first quarter of 2023. Passenger vehicle unit sales declined by 7.3% year-over-year. Commercial vehicle hold unit sales decreased by 2.9%.

2023年第一季度中國汽車銷量持續疲軟，乘用車銷量同比下降7.3%。商用車保有量銷量下降 2.9%。

According to statistics from the China Association of Automobile Manufacturers, the market declined by 11.4% in units year-over-year, and the important SUV market was down by 3.4% year-over-year. Mitigating these lower growth numbers somewhat is a 9.2% year-over-year increase in the unit sales of buses and semi-trailer truck unit sales grew by 21.3%. New energy vehicle unit sales also rose by 26.2% year-over-year in the first quarter as new energy passenger vehicle sales rose by 25.2% and a much smaller new energy commercial vehicle sales were 50.3% higher.

據中國汽車工業協會統計，市場銷量同比下降11.4%，其中重要的SUV市場同比下降3.4%。客車銷量同比增長 9.2%，半掛卡車銷量增長 21.3%，在一定程度上緩解了增長放緩的影響。一季度新能源汽車銷量也同比增長26.2%，其中新能源乘用車銷量增長25.2%，規模較小的新能源商用車銷量增長50.3%。

In late 2022, we announced an expansion of our relationship with BYD, China's largest EV producer and a partner for 20 years. The BYD's research and development team, we have designed a new series of EPS products, including C EPS, VP EPS and our R EPS for all BYD's series of products. Due to our DP EPS superior performance in noise, vibration and harshness, our DP EPS products have been replacing higher cost R EPS by BYD, especially for BYD's high-end vehicle models, the tank and the hand. We continue to work closely with BYE or new steering product development.

2022 年底，我們宣布擴大與中國最大的電動汽車生產商、20 年合作夥伴比亞迪的合作關係。比亞迪的研發團隊，我們為比亞迪全系列產品設計了一系列新的EPS產品，包括C EPS、VP EPS和我們的R EPS。由於我們的DP EPS在噪聲、振動和聲振粗糙度方面的優越性能，我們的DP EPS產品已經被比亞迪替代成本更高的R EPS，特別是比亞迪的高端車型、坦克和手。我們繼續與 BYE 或新轉向產品開發密切合作。

Another step expanding our international presence is that luxury plug-in hybrid SUV model that Canaliis now being marketed in the U.S. beginning in 2023. was a subsidiary of and we have been a long-time supplier of steering to other brands under their umbrella, including Jeep, Ram and Beyond strengthening our presence in the European markets to sales in the U.S. market further expands our presence there, in addition to our production exports to Fiat Chrysler automobiles, SCA and Ford Motor Company in North America.

擴大我們國際影響力的另一個步驟是豪華插電式混合動力 SUV 車型，Canaliis 現已從 2023 年開始在美國銷售。我們是其子公司，我們一直是其旗下其他品牌轉向系統的長期供應商，包括除了向北美的菲亞特克萊斯勒汽車、SCA 和福特汽車公司出口產品外，Jeep、Ram 和 Beyond 還加強了我們在歐洲市場的佔有率，以進一步擴大我們在美國市場的佔有率。

Sales in North America increased by 7.6% year-over-year, mostly due to a higher demand from FCA. While sales in our Brazilian operations grew by 2.9% year-over-year. We continue to make progress with improving our proprietary EPS products to develop our own Advanced Driver Assistance Systems, ADAS. Using our AP04 platform for Level 4 autonomous driving. We continue to integrate technologies an AB subsidiary into our products.

北美銷量同比增長 7.6%，主要是由於 FCA 的需求增加。而我們巴西業務的銷售額同比增長 2.9%。我們不斷改進我們的專有 EPS 產品，以開發我們自己的高級駕駛輔助系統 (ADAS)。使用我們的 AP04 平台進行 4 級自動駕駛。我們繼續將 AB 子公司的技術集成到我們的產品中。

We are also working with to provide enhanced steering to their customers. Our profitability improved in the 2023 first quarter, led by greater sales of products with higher technology content, especially our rising sales of EPS products. These sales, combined with ongoing cost control measures, generated gross margin improvement of 4.6% year-over-year in the 2023 first quarter to 15.2% from 10.8% in the year ago same quarter.

我們還與他們合作，為他們的客戶提供增強的指導。 2023年第一季度，我們的盈利能力有所改善，主要得益於技術含量較高的產品銷量增加，特別是EPS產品銷量的增長。這些銷售，加上持續的成本控制措施，使 2023 年第一季度的毛利率同比增長 4.6%，從去年同期的 10.8% 提高到 15.2%。

Total operating expenses declined by approximately 15.6% year-over-year in the first quarter, led by a 21.5% reduction in both selling and R&D expenses. The income per share of $0.23 in the 2023 first quarter compared with 0 in the year ago same quarter.

第一季度總運營費用同比下降約 15.6%，其中銷售和研發費用減少 21.5%。 2023 年第一季度每股收益為 0.23 美元，而去年同期為 0。

We maintained our financial strength with cash and cash equivalents, pledged cash and short-term investments of $164.3 million as of March 31, 2023, and parent company stockholders' equity was $322.8 million. Sales of our traditional products to our legacy customers in China remained steady in the first quarter as our product portfolio of EPS has grown, so has our customer base for these products in China. We anticipate that the Chinese economy will continue to recover from the COVID lockdowns and restrictions, with the resurgence of past consumer buying patterns aided by government vehicle incentives, which will benefit the automobile industry over the next several quarters.

截至 2023 年 3 月 31 日，我們的現金和現金等價物、質押現金和短期投資為 1.643 億美元，母公司股東權益為 3.228 億美元，保持了財務實力。隨著我們的 EPS 產品組合的增長以及這些產品在中國的客戶群的增長，我們對中國傳統客戶的傳統產品銷售在第一季度保持穩定。我們預計，中國經濟將繼續從新冠疫情封鎖和限制中復蘇，在政府汽車激勵措施的幫助下，過去的消費者購買模式將會復蘇，這將使汽車行業在未來幾個季度受益。

Now let me review the financial results in the first quarter of 2023. Net sales increased by 4.3% to $142.2 million in the first quarter of 2023 compared to $136.4 million in the first quarter of 2022. The net sales increase was mainly due to the gradual recovery of the Chinese economy post-COVID-19.

現在讓我回顧一下 2023 年第一季度的財務業績。2023 年第一季度的淨銷售額增長了 4.3%，達到 1.422 億美元，而 2022 年第一季度為 1.364 億美元。淨銷售額的增長主要是由於COVID-19 後中國經濟的複蘇。

Net sales of traditional steering products and parts were $94.4 million for the first quarter of 2023, which is consistent with $95.4 million for the same period in 2022. Net sales of electric power steering EPS products rose 16.6% to $47.8 million from $41 million for the same period in 2022. Henglong KYB sales of passenger vehicle EPS products surged by 24.8% year-over-year to $37.2 million.

2023 年第一季度傳統轉向產品和零部件的淨銷售額為 9440 萬美元，與 2022 年同期的 9540 萬美元持平。電動助力轉向 EPS 產品的淨銷售額從 2022 年第一季度的 4100 萬美元增長 16.6% 至 4780 萬美元。 2022年同期，恆隆KYB乘用車EPS產品銷售額同比飆升24.8%至3720萬美元。

EPS product sales were 33.6% of the total net sales for the first quarter of 2023 compared with 30.1% for the same period in 2022.

EPS產品銷售額佔2023年第一季度總淨銷售額的33.6%，而2022年同期為30.1%。

North American net export sales rose by 5.5% to $34.7 million in the first quarter of 2023 compared with $32.9 million in the first quarter of 2022. Steering product sales of the commercial vehicle markets declined slightly year-over-year in the 2023 first quarter.

2023年第一季度北美淨出口銷售額增長5.5%，達到3470萬美元，而2022年第一季度為3290萬美元。2023年第一季度商用車市場轉向產品銷售額同比略有下降。

Gross profit climbed by 46.9% to $21.6 million from $14.7 million in the first quarter of 2022. Gross margin in the first quarter of 2023 was 15.2% compared to 10.8% for the first quarter of 2022, mainly due to a change in the company's product mix and an increase in average selling prices for the 3 months ended March 31, 2023.

毛利潤從2022年第一季度的1470萬美元攀升46.9%至2160萬美元。2023年第一季度的毛利率為15.2%，而2022年第一季度為10.8%，主要是由於公司產品的變化截至 2023 年 3 月 31 日止 3 個月的混合價格和平均售價上漲。

Gain on other sales was $0.7 million compared to $0.9 million in the first quarter of 2022. Selling expenses declined by 20.9% to $3.4 million from $4.3 million in the first quarter of 2022. This decline in selling expenses was primarily due to lower transportation, marketing and office expenses and the impact from appreciation of the U.S. dollar against the RMB. Selling expenses represented 2.4% of net sales in the first quarter of 2023 compared to 3.2% in the first quarter of 2022.

其他銷售收益為 70 萬美元，而 2022 年第一季度為 90 萬美元。銷售費用從 2022 年第一季度的 430 萬美元下降 20.9% 至 340 萬美元。銷售費用下降主要是由於運輸、營銷費用減少辦公費用以及美元兌人民幣升值的影響。 2023 年第一季度銷售費用占淨銷售額的 2.4%，而 2022 年第一季度為 3.2%。

General and administrative expenses were $4.8 million, which is consistent with the $4.8 million of the first quarter of 2022. G&A expenses representing 3.4% of net sales in the first quarter of 2023 compared with 3.5% of net sales in the first quarter of 2022.

一般及行政費用為 480 萬美元，與 2022 年第一季度的 480 萬美元一致。一般及行政費用佔 2023 年第一季度淨銷售額的 3.4%，而 2022 年第一季度則占淨銷售額的 3.5%。

Research and development expenses are indeed decreased by 21% to $6.4 million compared to $8.1 million in the first quarter of 2022, mainly due to a decrease of tooling charges and the depreciation of the RMB against the U.S. dollar. R&D expenses represented 4.5% of net sales in the first quarter of 2023 compared to 6% in the first quarter 2022.

與 2022 年第一季度的 810 萬美元相比，研發費用確實下降了 21% 至 640 萬美元，主要是由於模具費用減少以及人民幣兌美元貶值。研發費用佔 2023 年第一季度淨銷售額的 4.5%，而 2022 年第一季度為 6%。

Net other income was $1.5 million for the first quarter of 2023 compared to $3.5 million for the first quarter of 2022. This decrease was mainly due to less government subsidies received in the first quarter of 2023.

2023 年第一季度的其他淨收入為 150 萬美元，而 2022 年第一季度為 350 萬美元。這一下降主要是由於 2023 年第一季度收到的政府補貼減少。

Income from operations was $0.7 million in the first quarter of 2023 compared to a loss from operations of $1.5 million in the first quarter of 2022. The 2023 first quarter income was primarily due to higher gross profits and lower operating expenses compared with the first quarter of 2022.

2023 年第一季度的運營收入為 70 萬美元，而 2022 年第一季度的運營虧損為 150 萬美元。2023 年第一季度的收入主要是由於與上一季度相比，毛利潤更高，運營費用更低。 2022 年。

Interest expense was $0.2 million in the first quarter of 2023 compared to $0.4 million in the first quarter of 2022. Net financial loss was $0.4 million in the first quarter of 2023 compared with a net financial income of $2 million in the quarter of 2022. The net financial loss in the first quarter of 2023 was primarily due to foreign exchange losses.

2023 年第一季度的利息支出為 20 萬美元，而 2022 年第一季度為 40 萬美元。2023 年第一季度的淨財務損失為 40 萬美元，而 2022 年第一季度的淨財務收入為 200 萬美元。 2023年第一季度的淨財務損失主要是由於外匯損失。

Income before income tax expenses and equity in earnings of affiliated companies was $8.6 million in the first quarter of 2023 compared to $3.6 million in the first quarter of 2022. The increase in income before income tax expenses and equity in earnings of affiliated companies in the first quarter 2022 was mainly due to higher income from operations, partially offset by a loss in net financial income.

2023 年第一季度所得稅費用和關聯公司收益權益之前的收入為 860 萬美元，而 2022 年第一季度為 360 萬美元。第一季度所得稅費用和關聯公司收益權益之前的收入增加2022 年季度的增長主要是由於運營收入增加，但部分被淨財務收入損失所抵消。

Equity income of affiliated companies was $0.1 million in the first quarter of 2023 compared with equity in loss of affiliated companies of $2.5 million in the first quarter 2022. Net income attributable to parent company's common shareholders was $6.8 million in the first quarter of 2023 compared to a net loss attributable to parent company's common shareholders of $0.1 million in the first quarter of 2022.

2023 年第一季度關聯公司的股本收入為 10 萬美元，而 2022 年第一季度關聯公司的股本虧損為 250 萬美元。2023 年第一季度歸屬於母公司普通股股東的淨利潤為 680 萬美元，而 2023 年第一季度歸屬於母公司普通股股東的淨利潤為 680 萬美元，而2022 年第一季度歸屬於母公司普通股股東的淨虧損為 10 萬美元。

Diluted income per share was $0.23 in the first quarter of 2023 compared to a net loss per share of nil in the first quarter of 2022. The weighted average number of diluted common shares outstanding was 30,193,082 shares in the first quarter of 2023 compared to 30,851,776 shares in the first quarter of 2022.

2023 年第一季度的稀釋每股收益為 0.23 美元，而 2022 年第一季度每股淨虧損為零。2023 年第一季度已發行稀釋普通股的加權平均數量為 30,193,082 股，而 2023 年第一季度為 30,851,776 股2022年第一季度。

Management has reiterated revenue guidance for the full fiscal year 2023 of $560 million. This target is based on the company's current views on operating and market conditions, which are subject to change.

管理層重申 2023 財年的收入指引為 5.6 億美元。該目標基於公司當前對運營和市場狀況的看法，這些看法可能會發生變化。

With that, operator, we're now ready to begin the Q&A session.

至此，操作員，我們現在準備開始問答環節了。

(Operator Instructions) Your first question for today is coming from William Gregozeski at Greenridge Global.

（操作員說明）今天您的第一個問題來自 Greenridge Global 的 William Gregozeski。

I have a couple of questions. The Hubei and Henglong revenue was up quite a bit from the fourth quarter. Is that related to that Alfa Romea vehicle or just additional shipments from kind of a tough fourth quarter and where do you see that segment for the year trending?

我有一些問題。湖北和恆隆的收入較第四季度有較大增長。這與阿爾法·羅米亞汽車有關，還是與艱難的第四季度的額外出貨量有關？您認為該細分市場今年的趨勢如何？

(foreign language)

（外語）

So Hubei and Henglong's first quarter revenue increased by a little over 5% and the dollar amount increased by $1.7 million. The main driver for that increase is still in the North America business. April and May is in the -- is being booked into consideration into an loans division's revenue. So to answer your question, it's still North America business.

因此湖北恆隆第一季度收入增長略高於5%，美元金額增加170萬美元。這一增長的主要推動力仍然是北美業務。四月和五月正在被計入貸款部門的收入。所以回答你的問題，這仍然是北美的事情。

Okay. And is the -- do you guys think the revenue for Hubei and Henglong is going to stay up above $30 million per quarter for the remainder of the year?

好的。你們認為今年剩餘時間內湖北和恆隆的收入會保持在每季度 3000 萬美元以上嗎？

(foreign language) Okay. It's going to be above -- it's going to be in the range of $30 million to $35 million in the quarter, every quarter fluctuate within that page this year.

（外語）好的。該季度的收入將在 3000 萬美元至 3500 萬美元之間，今年每個季度都會在該頁面內波動。

Okay. Great. And then on the gross margin side, are you guys still expecting that to be higher for 2023 than all of 2022?

好的。偉大的。那麼在毛利率方面，你們仍然預計 2023 年毛利率會高於 2022 年全年嗎？

(foreign language)

（外語）

In the first quarter of 2023, our gross margin was 15.2%, which is a very significant increase from Tier 1 2022 of 10.8% first line. The main factor attributable to 3 segments of our business. One is the Hubei and Henglong; the second is Brazil, our business allow business. And the last piece is the Henglong KYB. Now the first 2 line of business helped drive the gross margin appreciation is also because it's the growth the ForEx change. The stronger dollar helped -- definitely helpful with our gross margin expansion. And in terms of KYB -- Henglong's KYB business is mainly due to the volume increase. Also, our high-end product has increased which is helping the margin expansion.

2023年第一季度，我們的毛利率為15.2%，比2022年一線的10.8%有非常顯著的增長。主要因素歸因於我們業務的三個部分。一是湖北、恆隆；第二個是巴西，我們的業務允許業務。最後一塊是恆隆KYB。現在，前兩條業務線幫助推動了毛利率的上升，也是因為它是外匯變化的增長。美元走強對我們的毛利率擴張絕對有幫助。而就KYB而言，恆隆的KYB業務主要得益於銷量的增長。此外，我們的高端產品有所增加，這有助於利潤率的擴大。

And lastly, the overall volume increase helped us to better economy of scale. That also beneficial to our gross margin.

最後，總體銷量的增長幫助我們實現了更好的規模經濟。這也有利於我們的毛利率。

So overall, yes, 2023, the gross margin will be better than 2022. With this pace, we believe it's going to be continuing to the strong. Overall 2023 is going to be a better year on the gross margin than 2022.

所以總的來說，是的，2023 年毛利率將好於 2022 年。按照這個速度，我們相信它將繼續保持強勁。總體而言，2023 年的毛利率將好於 2022 年。

Okay. All right. And then last question was, you previously mentioned about 6% to 6.5% of revenue for R&D on a quarterly basis, and it was quite a bit lower than that in the first quarter. Is that still a good range? Or is that more of an annual range? How should we look at that?

好的。好的。最後一個問題是，您之前提到每季度研發收入的比例約為6%至6.5%，比第一季度下降了很多。這仍然是一個好的範圍嗎？或者這更多的是年度範圍？我們該如何看待呢？

(foreign language)

（外語）

The first quarter is -- you're right. Your observation is correct. Our R&D expense accounted for the total revenue is lower. There are some onetime events. There's also some of the activity related to the lower module fees. But overall, going forward, we believe the R&D expenses are going to be account between 5% to 5.5% of the total revenue.

第一季度是——你是對的。你的觀察是正確的。我們的研發費用佔總收入的比例較低。有一些一次性事件。還有一些與較低模塊費用相關的活動。但總體而言，展望未來，我們認為研發費用將佔總收入的5%至5.5%。

(Operator Instructions) We have reached the end of the question-and-answer session, and I will now turn the call over to Kevin for closing remarks.

（操作員指示）問答環節已經結束，我現在將電話轉給凱文做總結髮言。

We thank you for your participation in today's conference call. Please be safe, and we look forward to speaking with you again in the future.

我們感謝您參加今天的電話會議。請注意安全，我們期待將來再次與您交談。

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

今天的會議到此結束，此時您可以掛斷電話了。感謝您的參與。