Incident: The company released the 2021 annual report and the 2022 quarterly report. In 2021, the company achieved revenue of 1,615 million yuan, +16.53%; net profit of 122 million yuan, +0.76%; of these, Q4 achieved quarterly revenue of 426 million yuan, -10.47% year-on-year; and net profit of 111 million yuan, -80.93% year-on-year.
The company released its quarterly report for 2022. In the first quarter of 2022, the company achieved revenue of 407 million yuan, or -3.72% year-on-year; net profit to the mother was 18 million yuan, or -62.54% year-on-year.
Our comments on this are as follows:
Revenue side: Revenue in '21 was +16.53%. Among them, sales of new energy vehicle parts and automobile transmission parts increased by 43.25% and 36.09%, respectively, and weakened in 22Q1. By business, in 2021, automobile transmission parts business revenue was 565 million yuan, +36.09% year on year; new energy vehicle parts business revenue was 324 million yuan, +43.25% year on year; and auto engine parts business revenue was 290 million yuan, -3.38% year on year. The company's customers include car companies such as BYD, Tesla, and Great Wall. Domestic automobile sales rebounded in 2021. In particular, sales of new energy vehicles grew rapidly, helping the company's main business grow steadily.
22Q1 The company achieved revenue of 407 million yuan, -3.72% year-on-year. The domestic epidemic was repeated. Affected by this, the vehicle market declined, and the company's parts business weakened.
Gross profit margin: The company's gross margin in '21 was 20.8%, -5.27 pct, and 22Q1 company's gross margin was 15.93%, year-on-year -11.72 pct. It continues to be under pressure. The company's gross margin in '21 was 20.8%, year-on-year -5.27 pct. There are two main reasons: on the one hand, the main raw materials purchased by the company include aluminum alloy ingots, steel bars, plastic, etc. The price of raw materials rose sharply in '21, and at the same time, the rapid rise in international shipping charges exacerbated the rise in the company's procurement costs; on the other hand, repeated epidemics in some parts of the country in '21, combined with electricity restriction policies, led to regional power restrictions and production restrictions, and insufficient utilization of production capacity.
22Q1 The company's gross margin was 15.93%, year-on-year -11.72 pct. We believe that the repeated epidemic in many parts of the country in the first quarter of '22 affected the normal production and sales of automobiles by many car companies. The company, as an upstream supplier to car companies, was also affected, and gross margin continued to be under pressure.
Profit side: Net profit for the full year of '21 was +0.76%, which was basically the same, and net profit was -62.54% yoy in 22Q1. In '21, the company achieved net profit of 122 million yuan, +0.76% year-on-year, which is basically the same as in '20. The company's net profit was basically the same in the face of a high increase in revenue. We think it was mainly because the rise in upstream raw material prices suppressed the company's gross profit margin, which was compounded by an increase in the R&D expense ratio (+1.76 pct over the same period in '21), which led to a low growth rate of the company's net profit in '21.
22Q1 The company achieved net profit of 18 million yuan, -62.54% year-on-year. Raw material prices were high, and sales fell short of expectations due to the pandemic, and the decline was serious.
The expansion of the new energy components business is imminent, helping the company's performance to pick up. The company actively lays out the new energy sector to meet market demand. After years of technology research and development and experience accumulation, the NEV parts business has developed rapidly in the past two years. It has obtained project targets for first-line NEV customers such as BYD, Great Wall, NIO, and Changan. In '21, NEV parts business revenue increased 43.25% year-on-year. In addition, the company launched a plan to issue A-shares privately at the end of the 21st. It plans to invest in the construction of plants in Nanjing and Hungary to expand the production capacity of new energy components to meet the broad needs of the market. We believe that in the future, with the continuous expansion of the company's new energy customers, the steady increase in sales of new energy vehicles, and the construction of the new energy plant in Nanjing and the production base in Hungary, the company's new energy parts business will continue to expand, helping the company's performance grow rapidly.
Investment suggestions and profit forecasts: The company's profitability is affected by the rise in upstream raw materials and is under pressure in the short term. We believe that in the future, as problems such as chip shortages and raw material prices are solved, combined with the expansion of the company's new energy business, the company's performance is expected to increase rapidly. It is estimated that the company's operating income for 2022-2024 will be 2,019, 26.24 billion yuan, and 3.359 billion yuan respectively, and net profit to parent will be 1.55, 244, and 362 million yuan in that order. Corresponding to the current market value, PE will be 22.7, 14.4, and 9.7 times. Maintain a “buy” rating.
Risk warning: The domestic epidemic has been repeated, the price of raw materials has risen sharply, domestic automobile sales have fallen short of expectations, the chip shortage problem continues to worsen, and the macroeconomic economy is declining.
