Incident: On July 30, the company released an interim report. The first half of 2022 achieved operating income of 572 million yuan, an increase of 25.30% over the previous year, and the net profit of the mother was 97.213 million yuan, an increase of 16.42% over the previous year, after deducting net profit of 93,0885 million yuan, an increase of 18.32% over the previous year.
The capacity utilization rate has climbed, pressure on raw material costs has eased, and it has returned to the growth path. Looking at the situation in a single quarter, operating income was 315 million yuan, +23.76%/+22.75% year-on-year, and net profit of the mother was 62.4775 million yuan, +34.79%/+79.87% year-on-year. Revenue and profit both reached the highest levels in history.
In the fourth quarter of last year and the first quarter of this year, due to the beginning of depreciation and amortization of assets such as production line equipment in the new plant and the rise in labor costs, the company was burdened with heavy cost pressure and its profitability weakened. However, as the production capacity utilization rate of the fourth phase of the fund-raising project plant continued to increase, depreciation and amortization pressure gradually eased. Coupled with the fact that prices of major upstream raw materials all began to fall in the second quarter, the overall gross margin rebounded to 27.65% in a single quarter, an increase of 1.84 pct over the previous quarter. Furthermore, considering the transmission process from changes in raw material prices to profit margins, it is expected that the company's gross margin will continue to rise steadily in the second half of this year. It is undeniable that part of the company's growth in the second quarter is related to the unilateral appreciation of the US dollar, but what should be seen even more is that the support for the company's growth is quite clear. In terms of the layout and improvement of the above aspects, the company is moving forward step by step, continuously consolidating the momentum for future growth.
Deeply cultivate the Japanese market, independently develop domestic customers, and continuously optimize the downstream structure. Since its establishment, the company has continued to focus on the Japanese industrial control and automobile market, and has established cooperative supply relationships with many of the top 500 Japanese companies. As Japanese labor and environmental protection costs continue to rise, there is almost no new PCB production capacity locally. The overall industry has seen an outward migration trend. In the process of long-term cooperation between the company and Japanese customers, product quality management, delivery timeliness, and customer demand control have been tested by many parties, so it has a certain degree of first-mover advantage. The company has set up subsidiaries in Japan to further develop Japanese customers and expand its influence in the Japanese market.
At the same time, the rapid growth of the NEV market has created opportunities for domestic OEMs to overtake cars in corners. It is an unmissable opportunity for upstream local suppliers. Therefore, the company actively developed around existing downstream application fields and added 84 domestic customers in the first half of this year. Among them, there is no shortage of NEV companies such as Xiaopeng and core lidar suppliers. As orders from domestic and Japanese automobile customers continue to be released, the share of the company's automobile revenue has risen steadily. Among them, the increase in NEV-related revenue share is particularly clear.
Develop high value-added products and optimize product structures. The small-batch PCB market has many varieties and short delivery times. It is a customized product market, which requires high manufacturing and process accumulation from suppliers. The company continues to promote R&D and innovation. Automobile PCB boards are gradually expanding from ordinary boards such as in-vehicle communication systems, vehicle interior systems, lighting systems, etc., to important safety components such as high-value-added car body control safety systems, power engine control systems, lidar systems, etc., and continues to develop new products such as high-current, high-heat dissipation embedded copper power substrates and metal substrates for new energy vehicles. Other fields have successfully developed high-value products such as semiconductor test boards. Upgrading the product structure helps the company enhance its market influence, thereby obtaining more high-value-added orders.
Furthermore, the company is actively entering the downstream electronic assembly field. In the future, effective collaboration with the PCB business is expected to enhance customer stickiness and increase the flexibility of the company's performance.
Profit forecasts and investment ratings: Maintain buy ratings. Beginning in the fourth quarter of last year, whether in the face of fluctuations at the industry level or the rise in amortization costs brought about after the new production capacity was put into operation, the company has positively faced it, thus achieving continuous growth. Looking at the long term, the company's overall production capacity will have room for a large increase in the next 2-3 years. Strong demand in Japan's industrial control and domestic NEV markets is expected to be a guarantee for the company to absorb new production capacity. At the same time, the start and growth of the component assembly business is expected to bring new incremental flexibility to the company's performance. The company's net profit for 2022-2024 is expected to be 264 million, 336 million and 425 million respectively. The current stock price corresponds to PE 15.22, 11.97 and 9.45 times, respectively, maintaining the purchase rating.
Risk warning: (1) Company orders due to declining market sentiment in industrial control and automotive markets; (2) industry competition intensified due to the expansion of domestic PCB production capacity; (3) the company's production capacity climbing progress fell short of expectations.
