Items:

The company disclosed that operating revenue fell 19% year-on-year to 7.3 billion, net profit fell 25% year-on-year to 1.2 billion yuan, and non-net profit fell 25% year-on-year to 1.3 billion.

Peace viewpoint:

Downstream demand fell sharply, and the company outperformed the industry. 1H22 consolidated statement deducted non-net profit after deducting investment income was 340 million (- 43%), fuel injection system revenue fell 14% year-on-year to 3.4 billion, gross profit margin fell 2.5% to 21%; tail gas treatment system revenue fell 26% year-on-year to 3.2 billion, gross profit margin 9%; intake system revenue fell 33% year-on-year to 260 million, gross profit margin fell 11 percentage points to 22%. The output of 1H22 commercial vehicle industry has dropped 39%. Due to the overdraft demand of 1H21 trucks in advance of environmental protection policy, the current demand for exchange is insufficient, and there are still some vehicles in stock in the country five waiting to be digested. Due to the prevention and control of the epidemic in the first half of the year, the start of infrastructure was not as expected. Affected by the macroeconomic situation and the downward trend of the automobile industry, the sales of six-cylinder turbochargers and natural gas superchargers in intake system products have dropped much compared with the same period last year. In terms of non-road machinery, affected by factors such as the slowdown in macroeconomic growth, the repeated epidemic of COVID-19, the lack of effective operation rate of projects, and the adjustment of agricultural machinery subsidy policies, the market demand for construction machinery and agricultural machinery decreased. The sales of diesel internal combustion engines for 1H22 construction machinery were 450000, down 23.8 percent from the same period last year, and 650000 (- 24.8 percent) for agricultural machinery.

1H22's investment income is 930 million, accounting for 68% of the total profit. Of these, Bosch contributed 570 million (- 15%) and Zoomlion contributed 170 million (- 5.6%). Bosch Automotive 1H22 achieved revenue of 8.3 billion (- 18%), net profit of 1.69 billion (- 15%) and net interest rate of 20.3%. Bosch Automotive Diesel outperformed the average level of the commercial vehicle industry, and the net interest rate returned to more than 20%, highlighting the profitability brought about by the industry monopoly.

The company actively arranges new business. Further optimize the company's strategic blueprint to form a new strategic pattern for the all-round development of "energy saving and emission reduction", "green hydrogen energy", "intelligent electric" and "other core components"; complete hydrogen fuel cell global capacity planning and capacity investment planning, formulate strategic development plan for PEM hydrogen production system equipment, and carry out new energy industry park project planning. Complete the strategic product planning of electric drive core parts business, thermal management system and core parts business, and continuously optimize the millimeter wave radar business development planning. Comprehensively promote global capacity-building investment in hydrogen energy business, complete investment in IRD, Borit R & D and capacity expansion; set up hydrogen energy division and hydrogen fuel cell joint ventures one after another, accelerate capacity building in the Asia-Pacific region; implement investment cooperation in thermal management system and spare parts business, and promote VH M & A projects in an orderly manner; participate in investment in automotive-related industrial funds and seek opportunities for cooperation between upstream and downstream industrial chains In the fields of hydrogen production from water electrolysis of renewable energy and intelligent network connection, we have investigated and investigated potential cooperation projects and actively planned the possibility of cooperation.

Profit forecast and investment advice: the company has a solid position as the core component supplier of diesel engine industry chain. In recent years, the company actively arranges fuel cell core components, including "one membrane two plates" (membrane electrode, graphite bipolar plate, metal bipolar plate) and BOP key components, etc., supporting fuel cell stack and system manufacturers at home and abroad, and opening up a new space for the company's long-term development. It is expected that the heavy truck industry will decline by more than 40% in 2022, and there will be restorative growth in 2023, and the company's profit scale is expected to maintain a relatively stable level. In recent years, the company's cash dividend accounts for a high proportion of the year's net profit, and the retained profit is rich. It is expected that the proportion of dividends will remain high in the future. Based on the latest situation, we update the company's 2022 / 2023 / 2024 net profit forecast of 2.203 billion / 2.364 billion / 2.53 billion (the original forecast is 2.469 billion / 2.767 billion / 2.960 billion) and maintain the "recommended" rating.

Risk tips: 1) commercial vehicles continue to decline sharply; 2) the continued rise in precious metal prices lead to increased fluctuations in tail gas treatment business revenue and profitability; 3) the progress of new business development is not as expected.