[Key points of investment]
There was an inflection point in performance. The company released its semi-annual report. In 2022, H1 achieved operating income of 572 million yuan, an increase of 25.30% over the previous year; the company achieved net profit of 97 million yuan, an increase of 16.42% over the previous year. Among them, Q1 achieved net profit of 35 million yuan, a year-on-year decrease of 6.49%, and Q2 achieved net profit of 62 million yuan, an increase of 34.79% over the previous year. Q2 benefited from the gradual release of production capacity in the fourth phase of the company's fundraising project and the successful trial production of difficult products such as 80-layer semiconductor test boards, which improved the product structure. The epidemic was repeated. The impact of adverse factors, such as fluctuations in the international situation, was reversed, reversing the situation where the year-on-year growth rate of net profit returned to the mother in Q1 was negative, and Q2 performance reached an inflection point.
The sharp increase in operating costs affected gross profit margins, and the expense ratio declined during the period when exchange earnings helped. The gross margin of H1 in 2022 was 26.82%, a year-on-year decline of 3.45 pct. The main reason was a sharp rise in operating costs due to increased depreciation and amortization in the current period due to investment in fund-raising projects. Looking at the cost side, the cost rate of the H1 company in 2022 was 6.89%, a year-on-year decrease of 2.35pct. Specifically, the company's financial expenses were -11 billion yuan, a decrease of 11.38 million yuan compared to H1 in 2021, mainly due to exchange earnings; the company's R&D expenses were 26 million yuan, up 29.20% from the previous year, and the company continued to increase R&D investment.
Continue to pay attention to market demand and improve product structure. In the first half of 2022, new energy passenger vehicles were sold 2.248 million units, an increase of 122.5% over the previous year. Automotive electronics accounted for about 28% of the value of traditional luxury cars, while among new energy vehicles it could reach 47%-65%. As the penetration rate of automotive electronics increases, it will further boost the demand and value of automotive PCBs. Close to customer needs, the company continues to develop new products such as high-current, high-heat dissipation embedded copper power substrates and metal-based substrates for new energy vehicles, gradually expanding from ordinary vehicle PCBs such as in-vehicle communication systems, vehicle interior systems, and lighting systems to important safety components such as high-value-added body control safety systems, power engine control systems, and lidar systems. Against the backdrop of high prosperity in the automotive electronics industry, the company grasped the incremental development opportunities brought to the PCB market by automobile electrification, intelligence, and the development of new energy represented by photovoltaics, energy storage, etc., and its performance in the second half of the year is expected to achieve high growth.
The production expansion project progressed smoothly, and production capacity was gradually released. The company's high reliability circuit board project with an annual output of 450,000 square meters was fully put into operation in Q3 2021, forming a small-batch production pattern for phase 1 and 2, and large batch production in phase 3 and 4. It contributed 3.9017 million yuan of performance in H1 in 2022. It is expected to achieve annual revenue of 500 million yuan after delivery. The gradual release of production capacity expansion projects has injected new growth vitality into the company. With the trial production of the company's PCBA project, the company has been able to provide customers with one-stop service for the whole process from PCB design, prototype production, mass production and PCBA to further enhance cooperation and stickiness with customers, improve efficiency, reduce costs, and create value for the company.
[Investment advice]
The company's main business is R&D, production and sales of printed circuit boards (PCBs), covering common products on the market such as HDI boards, thick copper plates, metal substrates, stiff-flexure boards, high-frequency high-speed boards, etc., mainly used in the industrial control field and automotive electronics. Customers in the field of industrial control include Hitachi, Panasonic, etc.; customers in the automotive electronics field include traditional car companies represented by Honda, Toyota, Nissan, etc., as well as new energy vehicle companies represented by Xiaopeng. According to the company's industry outlook and performance in the first half of the year, we expect the company's revenue for 2022/2023/2024 to be 1,485/2,217 billion yuan respectively, net profit of 257/372/473 million yuan respectively, EPS is 2.52/3.64/4.64 yuan respectively, and the corresponding PE is 16/11/9 times respectively, giving a “increase in holdings” rating.
[Risk Reminder]
The repeated impact of the epidemic;
Downstream demand fell short of expectations;
Risk of rising raw material prices.