[Investment points]
2022Q1's annual performance increased significantly. According to the company's disclosure of the first quarter report of 2022, the company achieved revenue of 1,055 million yuan in the first quarter of 2022, an increase of 44.68% over the previous year. It achieved net profit of 84.92 million yuan, an increase of 1787.66% over the previous year, and realized net profit of 88.36 million yuan after deducting non-net profit of 88.36 million yuan, an increase of 5375.55% over the previous forecast, in line with previous forecast guidelines. Net cash flow from operating activities during the period reached 115 million yuan, an increase of 202.27% over the previous year.
Product competitiveness continues to improve, and revenue scale is growing steadily. The company continuously enhances its product competitiveness in consumer electronics, new energy vehicles, VR/AR and other business fields, and actively develops new businesses. The company has continuously improved its R&D technical capabilities and delivery capabilities. At the same time, with the gradual release of the company's expanded production capacity, the company's operating income has grown steadily.
Profitability continues to improve, and the share of the NEV business continues to increase. The overall gross profit margin of 2022Q1 was 24.55%, an increase of 1.06 pct over the previous year and an increase of 5.39 pct over the previous month. The revenue share of the company's new energy vehicle business continues to increase. According to the company's 2021 annual report, the gross margin of the company's NEV business is about 32.64%, and the gross margin of the smart terminal functional parts and precision structural parts and module products business is 15.93%. The increase in the share of the NEV business has led to a continuous increase in the company's overall profitability.
Foreign investment expands business and helps long-term growth. In order to better serve overseas customers, enhance the company's international competitiveness and service capabilities, and improve the company's business layout and medium- to long-term strategic planning, Shixin International, a wholly-owned subsidiary of the company, plans to use 2 million US dollars of its own capital to establish a wholly-owned subsidiary Seksun USA Inc (Seksun USA) in the US, and plans to use 5 million US dollars of self-raised capital to establish a wholly-owned subsidiary Seksun Texas Inc (Seksun Texas). On February 23, 2022, the two US subsidiaries completed registration procedures and received registration documents issued by local administrative authorities. In addition, the company plans to establish a joint venture with Jiangsu Stik New Materials Technology, Suzhou Andique Hydrogen Energy Technology. The registered capital of the joint venture is 24 million yuan, of which the company has pledged 13.2 million yuan, with a pledge ratio of 55%. The establishment of a joint venture with Stik is a decision made by the company based on its overall strategy and long-term development. It further accelerates the industrialization process of hydrogen fuel cell core component strategic business and accelerates the company's strategic collaboration and resource integration.
[Investment advice]
The company's product competitiveness in consumer electronics, new energy vehicles, VR/AR and other business fields continues to improve. Based on strong R&D strength, forward-looking market layout, and deepening customer relationships, it is expected to directly benefit from continued downstream demand. We maintain our projected revenue estimates for 2022-2024 of 4.935, 6654 and 8.184 billion yuan respectively, net profit of 410, 569 and 653 million yuan respectively, corresponding to EPS of 0.60, 0.83, and 0.96 yuan/share, respectively, corresponding to the current PE of 21, 15 and 13 times, respectively, maintaining the “increase in holdings” rating.
[Risk Reminder]
Downstream market demand fell short of expectations
Continued rise in upstream costs is putting pressure on the company's profitability
Strong exchange rate fluctuations have an impact on profits