Event

The company released its mid-2022 report that revenue in the first half of the year was 517 million yuan, an increase of 23.16% over the same period last year, and the net profit was 75 million yuan, an increase of 17.27% over the same period last year, deducting 71 million yuan from non-net profit, an increase of 39.03% over the same period last year.

Brief comment

1. The performance in the second quarter was higher than the same period last year, which was better than expected.

2022Q2, the company achieved revenue of 320 million yuan, an increase of 48.17% over the same period last year, a net profit of 55 million yuan, an increase of 77.66% over the same period last year, and a deduction of 54 million yuan of non-net profit, an increase of 99.72% over the same period last year, which was better than expected. Affected by the prevention and control of the epidemic, the company's Shenzhen factory fell into a short-term shutdown in the first quarter, affecting production and operation, resulting in poor performance in the first quarter. The company continued to make efforts in the second quarter, seizing the opportunity of strong downstream demand, implementing the "big customer" strategy, forming a close linkage between the client, the supply chain and the production end, efficiently achieving product delivery, off-grid energy storage, automotive electronics business volume, 2022Q2 performance significantly improved.

2. Off-grid energy storage and automotive electronic acceleration account for 56% of the total revenue.

The company's offline energy storage business achieved revenue of 236 million yuan in the first half of the year, an increase of 137.95% over the same period last year, with a gross profit margin of 13.91%, which increased 0.13pp over the same period last year, mainly due to the rapid expansion of the company's customer Sun King business. In addition to the upgrading of the original market products, the demand for new market products is also increasing, and the company fully benefits as its main supplier. The company's automotive electronics business achieved revenue of 52 million yuan in the first half of the year, an increase of 123.49% over the same period last year, mainly due to the rapid growth of vehicle shipments of the company's key customers, with a gross profit margin of 37.13%, a year-on-year decline of 9.61pp, which is expected to be related to the rise in raw material prices and the relocation of production lines. In the first half of the year, the company added a new production base to undertake smart home and home appliances, consumer electronics business, the original factory area is all used for automotive electronics business, with the second half of the production capacity climbing, the company's automotive electronics business is expected to further speed up. 2022H1, the company's offline energy storage and automotive electronics business combined revenue accounted for 55.65%, a year-on-year increase in 26.51pp, the new business has become the core momentum of the company's performance growth. The company implemented a restricted stock incentive plan in May 2022 and set a growth target of 60%, 40% and 20% for net profit growth in 2022 and 2023, demonstrating the company's confidence in development.

3. The gross profit margin is better than the previous month, and the exchange earnings are thicker.

The company's 2022Q2 gross profit margin is 20.46%, down 3.61pp from the same period last year and 1.75pp higher than the previous year. In the second half of the year, as the price of upstream raw materials gradually falls, the company's gross profit margin is expected to continue to be repaired.

The company's 2022Q2 net interest rate was 17.27%, an increase in 2.86pp over the same period last year and an increase in 7.16pp on a month-on-month basis, mainly due to an exchange gain of about 20 million yuan brought about by the appreciation of the US dollar, a significant decline in the financial expense rate, and a decrease in other expense rates as a result of scale effects. The company's expense rate during the 2022Q2 period was-0.25%, which decreased by 9.10pp compared with the same period last year, including financial expense rate-6.59%, year-on-year decrease of 7.93pp, R & D expense rate of 3.59%, year-on-year decrease of 0.64pp, management expense rate of 1.77%, year-on-year decrease of 0.47pp, sales expense rate of 0.98%, and decrease of 0.06pp compared with the same period last year.

4. The company has recently set up a new energy company, and the energy storage business is expected to go further.

The company established Dongguan Langte New Energy Technology Co., Ltd. (Dongguan Langte New Energy) on July 13, 2022. The scope of business includes contract energy management, battery manufacturing, battery sales, emerging energy technology research and development, energy storage technology services, power transmission and distribution and control equipment manufacturing, electronic components and electromechanical component equipment manufacturing, photovoltaic equipment and components manufacturing, photovoltaic equipment and components sales, solar power generation technical services, goods import and export, etc. Dongguan Langte New Energy has a registered capital of 10 million yuan, the company holds 70%, Shenzhen Liangyun Investment Partnership (limited partnership) holds 22%, and Shenzhen Ruihang Energy Co., Ltd. holds 8%. We believe that the company and partners jointly funded the establishment of a new energy subsidiary, energy storage business is expected to go further.

5. Profit forecast and investment suggestions. We estimate that the company's revenue in 2022, 2023 and 2024 will be 1.358 billion yuan, 1.962 billion yuan and 2.603 billion yuan respectively, and its net profit will be 207 million yuan, 292 million yuan and 395 million yuan respectively, corresponding to 33x, 23x and 17x respectively, maintaining the "buy" rating.

6, risk tips: changes in the macroeconomic environment, the company's smart home and home appliance business is not as expected; the intensification of market competition affects the company's supply share or profitability among major customers; the decline of customer competitiveness affects the growth rate of the company's off-grid lighting or automotive electronic controller business; the epidemic situation and chip shortage affect more than expected.