Introduction to this report:
The company's performance growth rate declined in the first half of 2022 due to the short-term impact of the epidemic; however, the certainty of the company's overseas business, domestic channel business, micro LED, and VR business is high, and performance is expected to improve in the second half of the year.
Key points of investment:
Maintain an “increase in holdings” rating. Considering the significant suppression of large screen demand in the first half of the epidemic, we slightly lowered the company's EPS forecast for 2022-2024 to 0.3 (-0.04), 0.42, and 0.5 yuan. The corresponding growth rates were 26%, 38%, and 19%, respectively. Referring to the industry valuation situation, we maintain the company's PE target of 30 times in 2022, and the corresponding stock price is 9 (-1.2) yuan.
The pandemic affected overall performance in the first half of the year. The company achieved revenue of 3.702 billion yuan in the first half of 2022, +2.8% year on year, and achieved net profit of 268 million yuan to the mother, -6.02% year on year. The decline in performance growth in the first half of the year was mainly affected by the epidemic. On the one hand, orders for the domestic smart display direct sales business were delayed, causing the channel to achieve revenue of 1.27 billion yuan in the first half of the year, down 2.85% from the previous year; second, the cultural tourism business was hit hard, achieving revenue of 360 million yuan in the first half of the year, a decrease of 49.7% over the previous year; third, under the epidemic, corporate expenses rose significantly. The cost rate for the four items reached 22.11% in the first half of the year, an increase of 1.87 pp. Looking at the present, the domestic epidemic is gradually easing, and the company's overall performance is expected to improve in the second half of the year;
Overseas business continues to recover, and domestic sales channel business continues to expand. Overseas business is still the main driving force for the company as a whole. It achieved revenue of 1.3 billion yuan in the first half of the year, +37.6% year on year, and the gross margin of overseas business reached 36.08%. The increase in revenue share also led the company's overall gross margin to increase 1.4 pp to 31.4% year on year. At the same time, the domestic channel brand “Jin Lixiang” achieved revenue of 174 million yuan in the first half of the year, +98.4% compared to the previous year, driving the domestic channel business to achieve revenue of 770 million yuan, +23.4% year on year. Looking at the current situation, the recovery in overseas demand is highly sustainable, and the domestic channel business still has plenty of room for growth. At the same time, the company's VR products also have great potential for growth, and the company's performance is highly sustainable.
Catalyst: The demand for high-definition displays is rapidly increasing.
Risk warning: Affected by the epidemic, the company's production capacity construction fell short of expectations.
