1H22 results are in line with our expectations
The company announced 1H22 results: 1H22's revenue was 501 million yuan, -16.60% year on year; net profit of the mother was 77 million yuan, -25.45% year on year. Corresponding to 2Q22 revenue of 299 million yuan, -27.17% year on year, +41.31% month on month; return mother's net profit was 501 million yuan, -19.10% year on year, +97.24% month on month, in line with our expectations.
Development trends
The epidemic affected the pace of revenue confirmation in the design business in the first half of the year, and on-hand orders were full to support medium- to long-term development.
The revenue side of 1H22 declined year-on-year, mainly due to frequent outbreaks of the epidemic across the country in the first half of the year, which led to a slowdown in project acceptance progress. Revenue and profit in the second quarter showed a clear month-on-month recovery. We think this is mainly due to the fact that design service projects have progressed at an accelerated pace since June, and the pace of revenue recognition has accelerated month-on-month. Up to now, the total number of R&D business orders in the company's stock is 2,102 billion yuan. Stock orders are still increasing compared to 1Q22, and the company's competitiveness as a domestic third-party design service leader has been continuously verified. Looking ahead, we believe that the company's existing orders are expected to be implemented at an accelerated pace.
Expanding the NEV components business product matrix, DHT's hybrid transmission assembly contribution increased clearly in the second half of the year. Based on the process knowhow accumulated by the company in the vehicle design process, in terms of the parts business, the company's reducer products are supplied with OEMs and Tier 1 suppliers such as Guangben, Dongben, and mainland Germany, and SAIC-GM Wuling were added to the DHT transmission assembly in the first half of the year. We expect that with the launch of Shangtong Wuling Star, mass production of parts will enter a period of acceleration in the second half of the year. In terms of profitability, since the gross margin of the parts business was lower than that of the design business, 2Q22 profitability declined slightly month-on-month, and 2Q22 gross margin was +0.90ppt/ -4.15ppt to 35.36%, respectively, over the same period last month.
The intelligent business is progressing smoothly, with a multi-point layout of smart cockpits and intelligent driving. In the first half of the year, the company focused on promoting SOA architecture development and promoting the layout of smart cockpits and intelligent driving. 1H22 development expenditure increased 31.0% year-on-year to 81 million yuan. In the field of smart cockpits, the smart cockpit software and hardware system developed by the company based on the Xinchi SOC chip has basically completed the design, development and testing of the first phase of the plan, and the company expects to complete system testing tasks within this year. In addition, in terms of intelligent driving, the company has increased the development of domain control software for intelligent driving, and can provide customers with solutions such as integrated driving and adaptive cruising.
Profit forecasting and valuation
Due to the slowdown in the pace of project confirmation due to the pandemic, we lowered our 2022/2023 net profit by 21.5%/12.7% to 235 million yuan/357 million yuan. The current stock price corresponds to a price-earnings ratio of 32.8 times/21.5 times 2022/2023. Considering that the company's on-hand orders are full, looking ahead, it is expected that accelerated implementation will drive the company's revenue recognition pace. We maintained our outperforming industry ratings and simultaneously lowered the target price by 12.6% to 20.10 yuan, corresponding to 42.6 times the price-earnings ratio in 2022, with room for an increase of 30.1% compared to the current stock price.
risks
The volume of the parts business fell short of expectations, the expansion of new projects fell short of expectations, and the epidemic repeatedly affected the pace of revenue recognition.