Performance review
1Q22 performance is basically in line with our expectations.
Shenzhen Science and Technology announced its results for the first quarter of 2022: in the single quarter of 1Q22, the company realized revenue of 3.651 billion yuan, down 4.60% from the same period last year, and realized net profit of 242 million yuan, an increase of 21.04% over the same period last year, basically in line with our previous expectations.
Trend of development
Affected by the epidemic performance short-term pressure, optimistic about the company's annual revenue resilience and storage closed testing business development.
1Q22 achieved revenue of 3.651 billion yuan, down 4.60% from the same period last year, and deducted non-return net profit of-20.86 million yuan, a decrease of 85 million yuan over the same period last year. We believe that the main reason is that Q1 is affected by the epidemic and the decrease in production leads to a decrease in profits in the main business.
Looking to the future, we are optimistic that the company will actively expand the closed testing capacity of storage semiconductors, and the company is expected to usher in the second growth curve. The company actively expanded the closed testing capacity of storage semiconductors. Hefei Peyton Storage Project completed the first phase of the project in June 2021 and officially put into production in December 2021. Shenzhen Science and Technology Peyton 2021, a subsidiary of closed testing business, realized operating income of 2.2 billion yuan and net profit of 140 million yuan. We believe that with the smooth expansion and commissioning of the company's closed testing capacity, the company is expected to cooperate with the business development of Hefei Changxin and other domestic memory chip manufacturers to achieve the rapid growth of closed testing business. be optimistic about the performance increment brought by the closed test business of storage semiconductors.
The rate of management expenses gradually returned to the normal level, and the rate of R & D expenses increased compared with the same period last year. In the process of consumer electronics business integration, the company transferred the related business of the Huizhou factory to the Guilin factory, bringing some staff diversion and settlement fees, superimposed the start-up expenses of Hefei Peyton Storage and put into production, and the company's management expenses increased by 32.6% in 2021 compared with the same period last year. We believe that with the completion of the integration of consumer electronics business and the gradual improvement of Hefei Peitun capacity construction, the company's management expense rate is expected to gradually return to the normal level, with the 1Q22 management expense rate of 3.4%, down 1.7ppt from the same period last year. We see that the company will complete the divestiture and integration of the consumer electronics business in April 2022, and the management expense rate may be further optimized to enhance the company's profit space. 1Q22's R & D spending rate was 2.3%, an increase of 0.6ppt over the same period last year. We believe that continuous R & D investment is the key for the company to develop the closed testing business of storage semiconductors and provide support for the company's long-term performance growth.
Profit forecast and valuation
We keep the net profit of 2022max at 860 million yuan / 1.09 billion yuan in 2023. The current share price corresponds to 17.6 times 2022 times earnings and 13.9 times 2023 earnings. Maintain an outperform industry rating, but taking into account the downward shift in the valuation center of the industry, we lower our target price by 6% to 14.0 yuan, corresponding to 25.3 times 2022 price-to-earnings ratio and 20.0 times 2023 price-to-earnings ratio, which has 44% upside compared to the current stock price.
Risk.
The localization of memory chips is not as expected, and the market demand of memory chips is not as expected.
