1H22 performance is lower than we expected.
The company announced 1H22 results: revenue of 24.284 billion yuan, + 7.6% year-on-year; net profit of 339 million yuan,-17.1% year-on-year. The company's performance was lower than we expected, mainly due to the fair value change loss of 123 million yuan in Gansu Bank and Anlu Technology, which the company participated in financial investment, while the fair value change income generated in the same period last year was 70 million yuan. Without considering the impact, the company's 1H22 performance is + 24.5% year-on-year.
Distributed photovoltaic business is growing rapidly, and the rising price of components partly affects profitability. 1) based on household photovoltaic to develop industrial and commercial photovoltaic business, the company has grown into one of the industry leaders with a large installed capacity of distributed photovoltaic power stations. The company's 1H22 has added 50, 000 grid-connected power stations, totaling more than 100000. 1H22 generated photovoltaic business income of 4.206 billion yuan (operation and maintenance service income of 48 million yuan), + 407% compared with the same period last year, and new energy business accounted for 17% of the company's total revenue, of which 2Q22 revenue was 2.69 billion yuan, compared with 1Q22377%. 2) the rising price of 1H22 silicon leads to an increase in the price of components. The gross profit margin of the company's photovoltaic business is 7.2%, year-on-year-5.2ppt. We expect that there will be some pressure on the profit of the company's photovoltaic business under the current component prices.
Smart system technology business performance is eye-catching, set-top box and broadband business growth is strong. 1) the company's intelligent system technology business is mainly included in Skyworth Digital, a listed subsidiary. The digital income of 1H22 Skyworth is + 36% year-on-year, and the net profit of home ownership is + 73% year-on-year. 2) 1H22's revenue from smart terminals (including broadband services) is + 70% compared with the same period last year, mainly due to the demand for overseas set-top boxes. 3) Skyworth To C's new VR all-in-one PANCAKE 1 leads the industry in hardware performance, and we believe that the company is expected to enrich VR content ecology in the future.
The TV business has been affected by the epidemic to a certain extent, and Kukai business has maintained steady growth. 1) 1H22 domestic TV revenue-24% to 4.45 billion yuan, sales volume-14%, gross profit margin 23.6% (year-on-year + 6.9ppt), benefiting from downward panel prices; overseas TV revenue-18% to 3.919 billion yuan, sales + 0.6% year-on-year.
2) the revenue of 1H22 Cookai system is 664 million yuan, which is + 10% compared with the same period last year.
Trend of development
1H22 national photovoltaic installed 30.88GW (year-on-year + 137%), distributed photovoltaic accounts for 64% of the new installed capacity. We expect the company's household photovoltaic revenue to continue the high growth trend, and industrial and commercial photovoltaic to bring performance increments. 1H22 panel prices have entered a downward cycle, we believe that the color TV business is expected to reduce profit pressure. Skyworth digital intelligent terminal business is growing rapidly, and we think it is expected to contribute more profits. Regardless of the impact of the fair value of financial investment in listed companies, we expect the company to maintain a net profit of 2022% and 2023% or 25% growth.
Profit forecast and valuation
Due to the poor performance of the company's investment income and the high price of components affecting the profit of the photovoltaic business, we cut the net profit by 5% in 2023 to 1.586 billion yuan / 1.88 billion yuan. The current share price corresponds to a price-to-earnings ratio of 5.5 times 2023 / 4.6 times earnings. Taking into account the overall downward valuation of the Hong Kong stock market, we have lowered our target price by 26% to HK $5.17, corresponding to a price-to-earnings ratio of 5.6 times 2023 / 7.2 times earnings in 2023, which is 35% higher than the current share price.
Risk.
New business development risk; market demand fluctuation risk; panel price fluctuation risk.