Earnings Call Transcript - CAAS Q1 2023

Operator, Operator

Greetings. Welcome to the China Automotive Systems First Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host Kevin Theiss. You may begin.

Kevin Theiss, Host

Thank you all for being here today for China Automotive Systems’ first quarter 2023 conference call. Joining me is Jie Li, our Chief Financial Officer, who will assist with questions later, along with translation support. As we start, I want to remind everyone that we may make forward-looking statements during this call, which are our company’s estimates and assumptions made as of today’s date. Actual results may differ significantly due to various factors, including those mentioned in our Risk Factors section in the annual report filed with the Securities and Exchange Commission. The ongoing COVID-19 pandemic poses risks that could negatively impact our business, including a weak market outlook for vehicle sales and economic slowdowns. Any unforeseen disruptions in our operations could lead to product shipment delays, increased costs, and reduced revenue. We do not commit to updating any forward-looking statements made during this call. I will summarize our first quarter results for the period ending March 31, 2023, followed by a Q&A session. The results are unaudited and reported in accordance with US GAAP. For this discussion, I will present the financial results in US dollars. Let’s start with an overview of the Chinese economy, the automotive industry, and our market position. In the first quarter of 2023, China's GDP growth improved to 4.5% year-over-year from the 2.9% growth seen in the fourth quarter of 2022, and slightly down from 4.8% a year ago. Retail sales increased by 5.8% year-over-year, with a notable rise in March. Industrial production saw a year-over-year increase of 3.9% in March, and infrastructure investment grew by 8.8% in the same period, but property development investment fell by 5.8%. Automobile sales in China were weak, with passenger vehicle sales down 7.3% and commercial vehicle sales down 2.9%. The overall market saw an 11.4% decline, although there were increases in bus sales and new energy vehicle sales. We strengthened our partnership with BYD, Australia's largest EV producer, and have developed a range of new EPS steering products. Additionally, our EPS products are being included in the Alfa Romeo Tonale luxury SUV, expanding our market presence in the US. In the first quarter of 2023, net sales rose by 4.3% to $142.2 million, largely due to the gradual recovery in China post-COVID-19. Traditional steering product sales remained stable, while EPS product sales grew by 16.6%. Gross profit increased significantly, and operating expenses saw a decline, contributing to improved profitability. Income from operations was $0.7 million compared to a loss last year, and net income attributable to shareholders reached $6.8 million. Therefore, diluted income per share was $0.23, up from zero in the same quarter of 2022. Our management has reiterated the revenue guidance for the full fiscal year 2023, aiming for $560 million, contingent upon current operating and market conditions.

Operator, Operator

Certainly. At this time, we will be conducting a question-and-answer session. Your first question for today is coming from William Gregozeski at Greenridge Global.