1H22 performance is slightly lower than we expected.
The company announced 1H22 results: 1H22 income 8.148 billion yuan, year-on-year-4.13%; return to the mother net profit 365 million yuan, year-on-year-43.62%, corresponding to 2Q22 income 3.952 billion yuan, year-on-year-5.1%, month-on-month ratio-5.8%; return mother net profit 169 million yuan, year-on-year-58.8%, month-on-month-14.2%. Affected by the epidemic and rising prices of raw materials, the performance of 1H22 is slightly lower than we expected.
Trend of development
The domestic epidemic, the rise in the price of raw materials and the adjustment of overseas business have put pressure on the profit end due to multiple factors. The net profit of 1H22 was-43.62% to 365 million yuan compared with the same period last year, mainly due to the adjustment of 1H22's North American business, increased costs for factory relocation and investment in new factories, resulting in losses in related businesses. The prices of bulk materials and sea freight remained high in the first half of the year, and the gross profit margin was-3.1ppt to 15.8%. 1H22 domestic repeated epidemic in Shanghai, Changchun, affecting the company's major customers FAW, SAIC and other mainframe plant operation, while the company's layout in Changchun thermoforming plant and Changchun Virginia, Changchun FAW Fusheng and other joint ventures, plant shutdown affects the income side performance. We believe that with the orderly promotion of the resumption of work and production of the main engine factories and the introduction of policies to promote automobile consumption, the company's performance may pick up in the second half of the year. 2H22 sea freight and raw material prices marginal decline, the company's gross profit margin 1Q22/2Q22 respectively compared to-4.45ppt /-1.46ppt, the marginal decline, we believe that with the decline in raw material prices, the company's profitability has greater room for improvement.
Continue to increase investment in research and development to consolidate competitiveness, operating cash flow under short-term pressure. 2Q22's R & D expenditure rate is the same as + 0.54ppt/+0.32ppt to 3.9%, and R & D investment is + 14.50% to 305 million yuan compared with the same period last year. We believe that the company will increase its R & D investment and actively promote the transformation of products from traditional internal and external accessories to lightweight, electronic and intelligent, which is expected to further consolidate competitiveness. 2Q22's sales fee rate is from + 2.60ppt/1.07ppt to 6.85% compared with the previous month, and the net operating cash flow is-83.11% to 54 million yuan compared with the same period last year. We expect the impact of North American business adjustment, as well as the epidemic to put short-term pressure on the company's business. With the gradual progress of overseas business adjustment and the acceleration of resumption of production, the company's cash flow performance is expected to improve.
Global capacity optimization is expected to accelerate, internal and external repair to enhance long-term growth momentum. 1H22 promotes the transfer of North American capacity to Mexican plants to reduce operating costs, and we believe that with its strong lean management capabilities and successful experience in restructuring its European operations, the company is expected to shorten the pain period of the business adjustment process that puts pressure on performance. We are optimistic that the company will improve its business structure through self-research and mergers and acquisitions, and continue to adjust the global business layout to produce more positive performance contributions.
Profit forecast and valuation
Due to the pressure on the company's performance caused by multi-factor resonance, we have reduced the 23-year net profit of 22amp by 21.8% 8.7% to 1.038 billion yuan / 1.292 billion yuan. The current share price corresponds to a 23-year price-to-earnings ratio of 11.9 times / 9.6 times earnings. Taking into account the smooth development of the company's new energy vehicle customers, and the capacity optimization is expected to release profit flexibility, we maintain an outperform industry rating and a target price of 18.50 yuan, corresponding to 14.5 times 22-year price-to-earnings ratio and 11.7 times 23-year price-to-earnings ratio. 21.6% upside compared to the current stock price.
Risk.
The price increase of raw materials is higher than expected, overseas integration is not as expected, and customer expansion is not as expected.