ZhinXing Auto Technology 2023: Significant improvement in profitability, self-developed products set to explode soon

According to the Zhitong Finance and Economics APP, on March 28, Zhitong Auto Technology (referred to as "Zhitong Auto") released its 2023 performance. The company achieved annual revenue of 1.216 billion yuan, gross profit of 121 million yuan, a 9.39% increase from the same period in 2022, and a gross profit margin increase of 1.6 percentage points to 9.94%. The net loss attributable to the parent company was significantly reduced by 43%. From a business perspective, the core business of the company is autonomous driving solutions and products, with annual revenue of 1.13 billion yuan, contributing 92.9% of the total revenue, still the largest source of income for the company. In 2023, the company proactively adjusted its product strategy to lower prices, which slightly affected revenue. However, it gained a larger market share and delivered 130,000 sets of autonomous driving solutions and products to customers, a year-on-year increase of 58%, maintaining a growth rate higher than the industry average. Through cost control, the gross profit margin of autonomous driving solutions and products increased by 0.79 percentage points to 8.24%. In 2023, most of Zhitong Auto's revenue came from selling autonomous driving solutions and products to OEMs (including autonomous driving domain controllers and intelligent forward-looking camera products). Leveraging core vertical integration capabilities in product design and development, algorithm and feature development, system integration, and manufacturing, the company develops autonomous driving solutions and products for OEMs. Zhitong Auto's autonomous driving solutions and products can be installed on New Energy Vehicles (NEVs) and Internal Combustion Engine Vehicles (ICEs), and can achieve full autonomous driving functionality. The self-developed iDC Mid full-stack autonomous driving domain controller by Zhitong Auto is accelerating its performance release. This year, iDC Mid has started initial production and is installed on Chery's Exeed models. The product's revenue has seen significant growth, with iDC Mid securing designated models for 6 vehicles so far, becoming a new important product line. Currently, the mass-produced models are Chery Exeed TXL and Exeed LX, with the product sales revenue increasing from 441,000 yuan in 2022 to 13.955 million yuan. With the full production of iDC Mid on all 6 designated vehicle models in the future, this revenue is expected to further explode. In terms of research and development, Zhitong Auto has increased R&D investment to accelerate product iteration and meet global market and diverse scenario demands. In 2023, the company's R&D expenses increased by 108.2%, with an R&D expense ratio of 17.81%, a year-on-year increase of 9.96 percentage points. The self-developed iDC Mid autonomous driving domain controller by Zhitong Auto has reached a leading level in the industry in terms of cost and performance through efficient hardware and software integration. It also supports high-speed autonomous assisted navigation driving (NoA), memory parking, 3D surround view, and other functions. The more advanced iDC High is expected to start mass production in 2024, and Zhitong Auto is deploying more advanced BEV + Transformer algorithms on this platform, which will greatly improve performance and support more autonomous driving scenarios. The iDC series is expected to become a popular product for the company, having secured designated models from two top domestic car companies in the battle for intelligent new energy vehicles From the market perspective, Aito Automotive Technology is deeply cultivating the domestic market, actively expanding into overseas markets, and continuously expanding its market share with a global strategy and the trend of intelligent driving. In the domestic market, while consolidating deep cooperation with Geely Auto, Aito is also exploring more customer resources. In 2023, it obtained 16 designated letters of intent from well-known OEM customers such as Great Wall Motors, Chery Automobile, and Dongfeng Motor, leveraging the product advantages of the iDC series. It is expected that in the future, by providing OEMs with more diversified and cost-effective solutions, Aito will occupy a larger market share. In the overseas market, in October 2023, a subsidiary was established in Germany, mainly responsible for the European autonomous driving solutions business to expand into the European market. Why did the company choose the European market as its breakthrough in overseas markets? There are mainly two considerations: first, in February 2024, a leading Chinese automaker equipped with the company's autonomous driving products successfully obtained EU GSR (General Safety Regulation) certification for the first time, gaining official recognition and export qualifications, giving it a competitive advantage over its peers. Second, the scale of the European new energy market is second only to China, and it is the source of most major automakers. With a lower penetration rate of new energy and intelligence, it has higher prospects for penetration rate growth compared to other regions. In the field of autonomous driving controllers, the top features are obvious. Among third-party suppliers, Desay SV and Aito Automotive Technology together hold over 50% of the market share in the domestic market, and the market share is tending towards concentration. In overseas markets, due to the slower development of new energy vehicles and intelligent vehicles, mainly led by Tesla, this is also the reason why many domestic new carmakers are choosing to go global, bringing huge business opportunities for third-party suppliers. In 2024, it is expected that the company's self-developed iDC series will accelerate performance release. Starting from the subsidiary in Germany, the company will expedite its layout in the European market globally, while not ruling out entering other regional markets. In the coming years, with the gradual realization of designated plans, Aito Automotive's performance is expected to further grow