Incidents:
The company released the 2021 annual report and the report for the first quarter of 2022. It achieved revenue of 1,679 billion yuan in 2021, an increase of 36.72% over the previous year; realized net profit of 65 million yuan, a year-on-year decrease of 20.29%. 2022Q1 achieved revenue of 423 million yuan, an increase of 47.35% over the previous year, and net profit of 8.2898 million yuan, an increase of 80.27% over the previous year.
Key points of the report:
Revenue increased steadily, with Dongguan Sixiang's NEV business contributing to increased performance. In 2021, orders for the NEV-related business of Dongguan Guixiang, a holding subsidiary, increased dramatically. It achieved annual revenue of 834 million yuan and net profit of 74 million yuan, contributing a significant increase in performance. Affected by factors such as the epidemic, rising raw material prices, and increased market competition, the company's water-cooling business profit was under pressure and projects were greatly blocked. In 2021, the company's gross profit margin was 26.39%, down 6.04 pct from the previous year. The company actively optimized cost control. In 2021, sales, management, R&D, and financial expense ratios fell 3.35, 0.66, 0.09, and 0.93 pct (amortization and accrued interest on convertible bond interest adjustments totaled about 17 million yuan), and the net interest rate in 2021 was 5.86%, down 2.31 pct year on year. 2022Q1 Company actively optimized its business layout, reversed the declining profit trend, and achieved an increase of 80.27% in net profit.
The electric water cooling business is expected to benefit from increased downstream demand, driving the company's performance to improve, and the 2022 National Grid Plan will start construction of a “10 traffic 3 direct” UHV project with a total of 13 UHV projects. It is expected that the booming construction of UHV projects will drive the growth of the company's water cooling equipment business. As fan power continues to increase, the number of new energy water cooling equipment required increases accordingly. The company is in a leading position in the new energy water cooling industry, and future growth in downstream demand will continue to improve the company's performance.
Actively expand energy storage heat management and IDC heat management business to create a second growth curve. Energy storage development is expected to accelerate in 2022. Thermal management is very important for lithium battery energy storage, and liquid cooling solutions are an important development direction in the field of energy storage and heat management. The company has technical reserves and solutions based on lithium battery single-cabinet energy storage liquid cooling products, large-scale energy storage power plant liquid cooling systems, prefabricated cabin energy storage liquid cooling products, etc., and has signed some prototype contracts. The “East Digital and Western Computing” project was officially launched in 2022, accelerating IDC's green and intensive layout. Reducing PUE is a development trend in the IDC industry, and liquid cooling solutions are expected to become the mainstream choice in the future. The ICT thermal management products developed by the company basically cover the product requirements of the entire server liquid cooling chain. At present, samples and small quantities of related products have been supplied. In the future, the company will continue to expand its market, and it is expected that the energy storage and IDC thermal management business will bring new room for growth to the company.
Investment advice and profit forecasting
We expect the company's revenue for 2022-2024 to be 25.69/36.26/4.912 billion yuan, a year-on-year increase of 52.95%/41.15%/35.48%; the estimated net profit to return to the parent is 1.58/2.33/350 million yuan, a year-on-year increase of 145.49%/47.20%/50.21%, corresponding to EPS 0.57/0.84/1.25, respectively. The current stock price corresponds to PE 15.7/10.7/7.1 times, respectively, maintaining the “buy” rating.
Risk warning
Risk of fluctuations in raw material prices; risk of UHV and wind power investments falling short of expectations; risk of increased market competition; risk of mergers and acquisitions and impairment of goodwill; risk of customer development and order acquisition falling short of expectations
