2021 and 1Q22 performance were lower than we expected.
The company announced 2021 and 1Q22 results: 2021 revenue 1.422 billion yuan, year-on-year + 18.32%; return to the mother net profit of 195 million yuan, + 2.75% year-on-year. Corresponding to 4Q21 income 411 million yuan, year-on-year-3.10%, month-on-month + 20.77%; return to the mother net profit of 41 million yuan, year-on-year-42.97%, month-on-month-13.14%. 1Q22 income 344 million yuan, year-on-year + 8.68%, month-on-month-16.33%; return to the mother net profit of 33 million yuan, year-on-year-34.16%, month-on-month-19.60%. Affected by the increase in the price of copper, plastic parts and other raw materials, the company's 2021 and 1Q22 performance is lower than we expected.
Trend of development
Consumer electronics business grew steadily, and the volume of new energy products accelerated. In 2021, the revenue of automotive electronics and automotive electronics sectors was + 15.4% to 310 million yuan / 950 million yuan respectively compared with the same period last year. Benefiting from the mass production of new energy projects such as Volkswagen, Bosch and Ningde era, the revenue of new energy business in 2021 was + 297.4% to 59 million yuan compared with the same period last year, accounting for 6.3% of automotive electronics business. Looking forward, we believe that with the increase in sales of new energy vehicles, the company's new energy projects are expected to contribute significant revenue growth.
The rise in the price of raw materials has put pressure on short-term profitability and increased investment in research and development to enhance technology reserves. The gross profit margin of 4Q21 is-13.35ppt/-9.36ppt to 23.00%, respectively. In addition to the impact of the adjustment of accounting standards, we believe that the main reasons for the decline in profits include: 1) the prices of bulk raw materials such as copper and plastic parts have increased since 3Q21, taking into account the company's inventory cycle, the price pressure is mainly reflected in the fourth quarter; 2) the new energy business is in the climbing stage and capacity utilization still needs to be improved. On the cost side, the company increased R & D investment in new projects, and the 1Q22 R & D expenditure rate was the same as + 0.6ppt/0.1ppt to 5.2%. Looking forward to the second quarter, considering that the epidemic affects the production capacity of customers downstream of the company, and the price of superimposed raw materials is still high, we expect the company's profitability to remain under pressure in the short term.
Layout of high-voltage connectors and intelligent cockpit products to broaden the product matrix. With the expansion of high-voltage and high-speed connector market, the company has actively laid out new energy three power systems and intelligent cockpit products, and has obtained a number of mass production projects, such as LG intelligent cockpit, joint electronic new energy electric drive system, Great Wall Motor power management system, and plans to further increase supporting capacity. We believe that the company has a leading level of mold development in the industry, and is expected to get more fixed points in the field of high pressure and high speed in the future and achieve a new growth curve.
Profit forecast and valuation
Due to the impact of the increase in the price of raw materials, we reduced the net profit in 2022 by 28.3% to 229 million yuan, and introduced the net profit of 296 million yuan in 2023 for the first time. The current share price corresponds to a price-to-earnings ratio of 23.9 times 2023 / 18.5 times earnings. Maintain an outperform industry rating, but due to the downward boom in the sector, we have lowered our target price by 53.7% to 17.00 yuan corresponding to 30.0 times 2022 price-to-earnings ratio and 23.2 times 2023 price-to-earnings ratio, which has 25.2% upside space compared with the current stock price.
Risk
The epidemic affected the production capacity of car companies, the price of raw materials exceeded expectations, and the expansion of new projects fell short of expectations.
