2022Q2 performance basically maintained a good growth trend, 2022H1 performance is basically in line with expectations. Recently, the company announced that 2022Q2 achieved revenue of 2.74 billion yuan, an increase of 9.98% over the same period last year, a net profit of 141 million yuan, an increase of 4.15% over the same period last year, and a net profit of 139 million yuan, an increase of 97.11% over the same period last year. 2022H1 realized revenue of 5.196 billion yuan, up 3.29% from the same period last year; net profit from home was 191 million yuan, down 2.36% from the same period last year; and net profit from non-return was 176 million yuan, up 36.65% from the same period last year. The company's revenue declined under the influence of the epidemic, but as the average price of the main business products increased by 14.84% over the same period last year, revenue as a whole maintained a steady growth. During the reporting period, the overall rate was 7.62%, down 0.59%, and the gross profit margin was 12.3%, up 0.5% from the same period last year. The company's logistics continues to recover, the scale advantage continues to appear, and it is expected to achieve high-quality double growth of revenue and net profit in the future.

The scale advantage of steady growth in the basic market continues to emerge, and the growth business is steadily advancing and injecting new increments.

The company specializes in communication network equipment manufacturing, mainly contract manufacturing, and has three major production bases in Taicang in the Yangtze River Delta, Shenzhen in the Pearl River Delta and Vietnam, based in East Asia and aiming at the world. At present, the company's business revenue at home and abroad accounts for half. As of 2022H1, communication terminal business, the company's PON series products achieved revenue of about 1.72 billion yuan, an increase of 4.43% over the same period last year, maintaining rapid growth; AP series products realized revenue of about 1.5 billion yuan, an increase of 1.72% over the same period last year; revenue of AP series products realized 660 million yuan, a decrease of 12.88% over the same period last year. With the acceleration of gigabit network construction, the market demand for PON is expanding, and the company's product structure is expected to improve and enhance its profitability. In terms of digital products, the company shipped 25G switches overseas in bulk in the first half of the year, and 100g TOR/DC switches entered the commissioning stage, with revenue exceeding 900 million yuan, an increase of 27.14% over the same period last year, and rapid business growth.

In terms of mobile communications, the company continues to invest in the research and development of 4G/5G small base stations. The base station communications company achieved revenue of 58.2136 million yuan, an increase of 178.98% over the same period last year. At present, the company's base station communications orders exceed 130 million yuan. In terms of sensor closed testing, the company closely follows the general trend of domestic substitution, and set up a subsidiary Shanghai Microelectronics last year to focus on advanced sensor packaging, testing and application. at present, sensor wafer level testing has been realized, and the company has been successfully put into production in the first half of the year. the performance is expected to be fully released in the second half of the year. In terms of automotive electronics, the company covers the whole vehicle factory and some Tier1 manufacturers. At present, it has completed the trial production and obtained more than 10 million of the intended orders. At present, plant reconstruction and equipment installation and commissioning are progressing steadily, the first project of automotive electronics business has been completed trial production, and mass production is being arranged in an orderly manner. The company keeps improving in the contract manufacturing industry for many years, launches multi-level business, stabilizes the company's basic market, constantly expands new business, enriches product lines, and strives to inject new increments into the company in the next three to five years.

Network construction continues to increase the market demand for high growth, the growth of new business is expected to exceed expectations.

At present, the construction of gigabit network continues to increase, and the market demand of Datong continues to grow with high potential energy, which is expected to lead to a strong order for network equipment such as switches; driven by strong domestic demand and global new technological innovation, the company's sensor closed testing business may usher in a good opportunity for development. As the smart car market continues to expand, companies that layout related businesses such as intelligent cockpit systems are expected to benefit simultaneously, and the company's automotive electronics business is expected to usher in a marginal improvement in performance. Combined with the company's 2022H1 performance, we give the company 22E-24E annual return net profit forecast value of 419 million yuan, 479 million yuan, 551 million yuan, corresponding to EPS of 0.53,0.60,0.70 yuan, corresponding to PE 15.72,13.76,11.95 times, and give a "cautious recommendation" rating.

Risk tips: the impact of the global epidemic and foreign policy uncertainty; exchange rate fluctuations; the risk of raw material price fluctuations; the risk of innovation transformation and development.