Performance Brief
On April 26, the company released its annual report for '21 and the quarterly report for '22. Its revenue for '21 was 1.42 billion yuan, an increase of 18% over the previous year, and the net profit of the mother was 195 million yuan, an increase of 3% over the previous year. 21Q4 revenue and net profit to the mother fell 3%/43% year on year; 22Q1 revenue and net profit returned to the mother +9%/-34% year on year.
Management analysis
With raw materials rising and revenue growth slowing, profit margins for 21Q4 and 22Q1 fell 10pct year over year. Revenue from automotive electronics increased 13% in '21. The increase mainly comes from revenue from new energy projects (power management, electric drives, battery management components) of 59 million yuan, an increase of 297% over the previous year, and the gross profit margin is 14%, which is expected to rise after volume release; and smart cockpit components amounted to 144 million yuan, an increase of 40% over the previous year. Net interest rates for 21Q4 and 22Q1 were 10.0% and 9.6% respectively, down 7/6pct from the previous year. This was mainly due to the rise in raw materials leading to a decline in gross margin, a slowdown in revenue growth, but a rapid increase in management expenses and R&D expenses. In addition, inventory increased 60% year on year in '21, and operating cash flow decreased 51% year on year, mainly due to early procurement of reserve raw materials in response to rising material prices, increased orders, and increased inventory reserves.
New Energy received high-quality orders from leading customers, and increased production capacity to cope with new orders. The company sold an average of 47 million new projects in '21 (210 million units sold in '21), including 10 million new energy vehicle products per year, receiving high-quality projects such as the Ningde Era, the Volkswagen MEB Platform, and Sinotruk; intelligent driving and smart cockpit products sold an average of 15 million units per year; and the average annual sales of R&D projects at the end of '21 were 55 million units. In response to new orders, the company expects to increase the production capacity of new energy/steering/smart cockpits by 800/400/5 million units in '22, an increase of 135%/60%/6%, respectively, compared to '21.
The share of high-quality automotive connector companies in the smart electric business is rapidly increasing. The company is a high-quality domestic automotive connector company. Its leading products are used in transmissions and steering systems with high safety levels, leading the industry in mold design, R&D, and automated production line development. In '21, the company's new energy vehicle and smart cockpit business accounted for 37% of automotive electronics, and the number of newly ordered products accounted for 53%.
Profit adjustments
We expect the company's net profit to the mother in 2022-2024 to be 2.6/35/42 billion yuan respectively, with a compound growth rate of 29%, corresponding EPS of 0.64/0.86/1.03 yuan respectively, and corresponding PE of 21/16/13 times respectively, maintaining the “buy” rating.
Risk warning
The risk that sales volume and connector orders for new energy vehicles fall short of expectations; the risk that the progress of ongoing research projects falls short of expectations; and the risk that the traditional fuel vehicle connector business will shrink in the long term.