The company's 2022Q1 realized revenue of 4.196 billion yuan,-3.2% year-on-year, and net profit of 197 million yuan,-17.6% compared with the same period last year. In 2021, the revenue was 17.588 billion yuan, + 4.1% compared with the same period last year, and the net profit was 1.265 billion yuan, + 48.9% year-on-year. Of this total, revenue in the fourth quarter of 2021 was 4.69 billion yuan,-14.5% compared with the same period last year, and the net profit was 322 million yuan, + 33.3% from the same period last year, which was within the scope of the previous forecast and was in line with market expectations. The company's automotive interior and exterior decoration and metal products are the world's leading competitiveness, customer quality; lightweight, electronic products continue to develop, the global layout continues to improve, is expected to usher in valuation reconstruction. Considering the negative factors such as the lack of cores in the automobile industry and the high price of raw materials, we downgrade the company's 2022 EPS forecast to 1.64 EPS 1.98 yuan (the original forecast is 1.76 bonus 2.13 yuan), and add 2.38 yuan to the 2024 EPS forecast. Give the company 15 times PE in 2022, corresponding to the target price of 25 yuan, and maintain a "buy" rating.

The performance is in line with expectations and the operation remains sound. On April 28, the company released its annual report for 2021 and quarterly report for 2022. The company's 2022Q1 realized revenue of 4.196 billion yuan,-3.2% year-on-year, and net profit of 197 million yuan,-17.6% compared with the same period last year. In 2021, the revenue was 17.588 billion yuan, + 4.1% compared with the same period last year, and the net profit was 1.265 billion yuan, + 48.9% year-on-year. Of this total, revenue in the fourth quarter of 2021 was 4.69 billion yuan,-14.5% compared with the same period last year, and the net profit was 322 million yuan, + 33.3% from the same period last year, which was within the scope of the previous forecast and was in line with market expectations. The company operates steadily, mainly due to the growth of many new energy vehicle companies leading to the optimization of the company's customer structure; and the completion of the European restructuring work, the impact of Germany's Huaxiang on the company's overall performance has been significantly reduced.

Due to the repeated epidemic situation of COVID-19, rising prices of raw materials and other adverse factors, the company's gross profit margin fluctuated. 1Q22's gross profit margin is 16.5%, year-on-year-2.2pcts, month-on-month-4.4pcts, the company's gross profit margin is under pressure, mainly due to the repeated epidemic of COVID-19, rising raw material prices and other adverse factors. The expense rate is 9.7%, year-on-year-0.6pct, month-on-month-1.4pcts, of which the sales expense rate is 1.6%, year-on-year-1.2pcts; management expense rate is 4.2%, year-on-year-0.1pct; R & D expense rate is 3.6%, year-on-year + 0.7pct; financial expense rate is 0.3%, which is the same as the same period last year. 4Q21's gross profit margin is 20.9%, year-on-year + 2.8pcts, month-on-month + 3.8pcts. The expense rate is 11.1%, year-on-year + 3.3pcts, month-on-month + 1.1pcts, in which sales expense rate is 2.2%, year-on-year + 2.7pcts; management expense rate is 4.4%, year-on-year-1.0pct; R & D expense rate is 4.3%, year-on-year + 1.7pcts; financial expense rate is 0.2%, which is the same as the same period last year.

Actively develop new energy vehicle customers, layout lightweight, electronic products. During the 2021 annual report period, the company maintained and consolidated high-quality customers such as Volkswagen, BMW, Mercedes-Benz, Audi, Ford, GM and Volvo, and actively infiltrated its new energy models, which are now equipped with Audi e-tron, Volkswagen ID series, Mercedes-Benz EQ series and other new energy models. At the same time, the company actively develops new customers of car building, and has now become Tesla, Inc., RIVIAN, BYD, NIO Inc., XPeng Inc. and ideal product suppliers, thus constantly optimizing the customer structure. Complying with the development trend of lightweight and electrification of the automotive industry, the company implements the development strategy of "self-R & D + epitaxial mergers and acquisitions", actively arranges lightweight materials, new energy battery packages and other products, and invests 46.25 million yuan to acquire 75% equity in Shanghai Yirui. In order to improve the company's R & D capabilities in software and electronics, such as "smart warehouse". We believe that the company's layout in automotive electronics is expected to start in 2022, and Yirui, as a cooperative company of a number of mainframe factories in Shanghai, will strongly promote the expansion of the company's automotive electronics business.

Continue to optimize the global layout and establish a long-term incentive mechanism. Since 2014, Germany's Huaxiang has suffered large losses; in 2020, the company began to restructure its European operations, closing its main factories in Germany and laying off staff, which was officially completed in 2021. In 2021, Germany's Huaxiang achieved a net profit of-140 million yuan, a loss of 57.5% less than that of the same period last year. At the same time, the company transferred North American capacity to Mexican plants to reduce operating costs. So far, the company's global layout has been further optimized. Germany Huaxiang and North American Huaxiang will strive to become global market order centers and innovative R & D headquarters to enhance the company's international capability. In March 2022, the company issued an employee stock ownership plan. A total of 51 employees, including middle and senior managers and business backbones, will participate in the subscription. The assessment targets include 2025 revenue of not less than 30 billion yuan, net profit of no less than 2.1 billion yuan, and net profit margin of no less than 7.0%. The shareholding plan will help to improve the benefit sharing mechanism between employees and shareholders, improve corporate governance, enhance employee cohesion, and promote the sustained and healthy development of the company.

Risk factors: global car sales are not as expected; overseas business restructuring is not as expected; Tesla, Inc. 's supporting expansion is not as expected; the impact of the epidemic at home and abroad is higher than expected.

Investment suggestion: the company is a global high-quality supplier of automotive interior and exterior decoration and metal parts, supporting mainstream customers such as Tesla, Inc., Volkswagen, Mercedes-Benz and BMW; lightweight and electronic products are constantly developed and the global layout is continuously optimized, which is expected to usher in valuation restructuring. Considering the negative factors such as the lack of cores in the automobile industry and the high price of raw materials, we downgrade the company's 2022 EPS forecast to 1.64 EPS 1.98 yuan (the original forecast is 1.76 bonus 2.13 yuan), and add 2.38 yuan to the 2024 EPS forecast. The downstream structure of the company is optimized, and the global layout continues to open. The compound growth rate of performance in 2022-24 is forecast to be 21%. With reference to the average level of PEG=1 in the industry, and due to the lack of cores and high raw material prices and other negative factors, we think we can give a certain discount, comprehensively consider giving the company 15 times PE in 2022, corresponding to the target price of 25 yuan, and maintain the "buy" rating.