[investment points]
Affected by the epidemic in Shanghai, the performance was lower than expected. According to the semi-annual report released by the company, the operating income of company H1 in 2022 was 1.877 billion yuan, down 5.82% from the same period last year; the net profit of returning to the mother was 83 million yuan, down 62.36% from the same period last year, of which Q2 realized a net profit of 12 million yuan, down 91.69% from the same period last year. This is mainly due to the fact that the company currently has three factories in Shanghai, and the Q2 epidemic in Shanghai this year has had a great impact on the production capacity of the factory. At the same time, affected by the domestic epidemic and macro-economy, the industry market is depressed, consumer electronics and other downstream terminal market demand is lower than expected, the company's product unit price and sales decline compared with the same period last year.
The rise in the price of raw materials drags down the gross profit margin. In 2022, the gross profit margin of H1 company was 11.86%, down from the same period last year. The main reason is that the price of raw materials has risen compared with the same period last year and the high unit labor fee during the release of new production capacity has led to an increase in operating costs. From the cost side, the expenditure rate of H1 company in 2022 was 9.52%, an increase of 2.93pct over the same period last year, mainly due to the substantial increase in company R & D investment. H1 company R & D expenditure in 2022 was 130 million yuan, an increase of 59.86% over the same period last year.
The trend of domestic substitution is stable, and the direction of R & D is in line with market demand. In 2021, the global CCL industry output value reached 18.807 billion US dollars, of which Chinese mainland and Hong Kong CCL output value of nearly 14 billion US dollars, accounting for about 74% of the global output value, has become the world's main production and manufacturing base of copper clad laminate.
Under the premise of the stable trend of localization, the market demand is also gradually clear. At present, the electrification and intelligence of automotive electronics have become a major trend, and automotive panels and high-frequency high-speed boards have become the core of market attention.
In the first half of 2022, the company actively developed high voltage withstand voltage, high MOT power amplifier, low CTE and low dielectric in AiP packaging, black copper clad laminate in LED, Ultra-low copper clad laminate in radio frequency communication, etc., and continued to invest verification fees in new projects developed by PCB and OEM/ODM terminal customers to actively complete diversified business layout.
We will promote capacity expansion in an orderly manner and expand our market competitive advantage. Half of the production capacity of N5 plant in Jiangxi production base has reached production capacity of Q2 smoothly, and the remaining half capacity is expected to reach production capacity of Q3. At the same time, N6 plant is under orderly construction. While ensuring the production capacity of existing traditional products, in order to cope with the outbreak of the downstream IC board market, the Shanghai production base plans to invest 425.6 million yuan to build an intelligent factory project with an annual output of 1.2 million square meters of IC board materials, which is also an important step for China's high-end products to break the monopoly of Japanese and Korean enterprises and achieve domestic substitution, which is conducive to the further improvement of the company's technical strength, and the completion of the project will also change the company's existing product structure. Raise the gross profit margin of the company as a whole.
[investment advice]
The company's main business is the design, R & D, production and sales of composite materials such as copper clad laminates and bonding sheets, including ordinary FR-4, lead-free compatible FR-4, high-frequency high-speed and other copper clad laminates. At present, the company has established long-term and good cooperative relations with well-known PCB manufacturers such as Oshikang, founder Technology, Guangdong Junya, Shanghai Power Co., Ltd., Hanyubod, Jianding Technology, Jingwang Electronics, Shenghong Technology, Shennan Circuit, Shengyi Electronics and so on. According to the outlook of the company's industry and its performance in the first half of the year, we reduce the company's operating income in 2022 to 5.098 billion yuan, and increase its operating income in 2023 to 7.029 billion yuan. It is estimated that the company's operating income in 2024 will be 8.977 billion yuan. Taking into account the rise in the company's operating costs, we reduce the company's gross profit margin and the company's 2023 net profit to $397 million. We estimate that the company's 2024 net profit will be $729 million, and the 2023 EPS for 2024 will be $1.69, 2.45, respectively, with a "overweight" rating corresponding to PE of 16-11-9.
[risk Tip]
The recurrent impact of the epidemic
Downstream demand is lower than expected
The risk of rising prices of raw materials.