1Q22 revenue increased by 107.4% compared with the same period last year, and its net profit increased by 107.2% compared with the same period last year.
The company's 21-year revenue was 3.604 billion yuan (YoY + 57.7%) and its home net profit was 353 million yuan (YoY + 10.6%). Since 2020, the warming of Sino-US trade friction has had a great impact on the orders of Huawei, the company's original major customer. The company has filled the missing share of the original major customers by introducing Glory, XIAOMI and other new customers, completed the optimization of customer structure, and achieved 21-year growth. Under the pressure of global smartphone shipments, 1Q22 achieved growth against the trend, with 1Q22 revenue of 1.072 billion yuan (YoY + 107.4%) and home net profit of 46.5 million yuan (YoY + 107.2%), mainly due to: 1) Honor, XIAOMI's order demand continued to grow; 2) India Sinorama shipments hit a record high in March; 3) the introduction of automotive electronics, smart wear and other new projects.
The company undertakes more material purchasing business, while thickening revenue, the profit margin level has declined. The company's 21-year gross profit margin is 20.54% (YoY-5.52pct) and net profit margin is 9.78% (YoY-4.16pct). The year-on-year decline is mainly due to: 1) the company has been dominated by the material processing mode before. With the change of customer structure, the company has undertaken the material purchasing process of some customers, which has not only increased revenue but also pulled down the profit margin level. 2) the company's capacity continues to expand, with a total of 13708 employees (YoY + 75%) at the end of 21, and the economies of scale and capacity flexibility have not yet been fully demonstrated. In contrast, the company's 1Q22 gross profit margin increased by 0.07pct to 17.81% year-on-year, while the net profit margin remained at 4.34% year-on-year, reflecting improved profit margins in the company's PCBA, finished product assembly and other processing businesses.
Mobile phone business has returned to high growth in the past 21 years, and diversified services such as automotive electronics and smart wear have been developed. From a business point of view, consumer electronics revenue in 21 years is 2.71 billion yuan (YoY + 45.1%). Under the background of breakthroughs made by new customers such as Glory and XIAOMI, mobile phone business has returned to high growth; Internet of things revenue 160 million yuan (YoY + 25.1%); network communications revenue 600 million yuan (YoY + 25.1%), high growth comes from new product development and increased procurement of materials. Automotive electronics revenue 58.03 million yuan (YoY+ 9.6%), the company Valeo project first products officially shipped in 1Q22, is expected to form a large incremental revenue in 22 years; smart wear revenue of 53.37 million yuan (YoY+35.7%), the company and XIAOMI reached cooperation in the field of smart wear, diversified business continues to develop.
Investment advice: target price 12.12-12.48 yuan, maintain the "buy" rating. We are optimistic: 1) the strong recovery of Glory brand and the increase in the share of XIAOMI customers have driven the mobile phone business to maintain high growth for 22 years; 2) the successful operation of factories in India and the landing of factories in Vietnam and Bangladesh further expand the market space of the company's global layout; 3) Automotive Electronics makes efforts to open up the company's medium-and long-term second growth curve. We expect the company's 22-24 year-on-year net profit to increase by 56.7%, 27.2% and 21.4% to 5.52, 7.03 / 853 million yuan. With reference to the 22-year comparable company's Wind consensus average of 16.91 times PE valuation, we give the company 17-17.5 times expected PE in 22 years, with a target price of 12.12-12.48 yuan, maintaining a "buy" rating.
Risk tips: demand is not as expected, production expansion is not as expected, new business, new customer development is not as expected.