Incident: The company released its 2022 mid-year report, achieving operating income of 620,000 yuan, a year-on-year decrease of 10.67%; Guimu's net profit of 191 million yuan, a year-on-year decrease of 28.7%, after deducting non-net profit of 172 million yuan, a decrease of 27.54% over the previous year; in the second quarter alone, the company achieved operating income of 315 million yuan, a decrease of 13.77% over the previous year; Guimo's net profit was 99 million yuan, a year-on-year decrease of 29.38%, after deducting non-net profit of 88 million yuan, a year-on-year decrease of 33.11%. The performance was slightly lower than expected.
Key points of investment:
The first half of the year was mainly affected by consumer electronics, and the challenges in the second half came from the demand side. According to IDC data, global mobile phone shipments reached 608 million units in the first half of 2022, a year-on-year decline of 8.6%. Consumer electronics markets such as mobile phones declined, affecting inventory digestion and left IC manufacturers with insufficient motivation to pull goods, leading to weak demand for testing. The main challenge in the second half of the year was to shift from the supply side to the demand side. Market conditions relied on whether the release of key new products from various brands boosted consumers' willingness to buy machines to a certain extent. The company's Q2 gross margin fell 3.35 pcts to 48.04% from the end of Q1. We expect it to be affected by production line utilization to a certain extent.
The rapid growth of the automotive CIS market is driving demand for automotive packaging, and a second growth curve is expected to develop. According to Microconsulting data, the CIS market size of the global automotive electronics industry was about US$1.91 billion in 2021 and will grow to US$3.27 billion by 2025, with a compound annual growth rate of 14.3%. According to Counterpoint data, the global automotive image sensor market demand will be around 220 million units in 2022, an increase of nearly 50% over the previous year. At the same time, with the further maturity of autonomous driving, it is expected to reach 550 million in 2025, which is faster than the mobile phone and security sector. Currently, automotive CIS mainly has two packaging processes: BGA and WLCSP. The increase in production capacity of BGA is limited. WLCSP has a great cost advantage below 2M, so that manufacturers can quickly increase the penetration rate and at the same time better control the increase in vehicle camera costs. The company has been operating in the automotive electronics field for many years and has cooperated deeply with leading high-quality customers. As competition on the automotive CIS circuit becomes more intense in the future, it is expected that leading manufacturers are expected to outsource the sealing and testing of some orders, and the OAST model may increase significantly in the automotive CIS testing process.
International mergers and acquisitions integration, extension and expansion of the industrial chain. The company achieved equity control over Jingfang Optoelectronics and Anteryon in the Netherlands in 2021, further strengthening the complementary integration of business and technology. On the one hand, the company promoted the steady growth of Anteryon's optical design and hybrid optical lens business, and its profitability continued to increase. At the same time, the company actively cooperates in technology and project development with Tier1 customers at home and abroad in the field of optical microdevices. While increasing the scale of mass production of microarray optical devices, the company strives to promote the development and promotion of MLA products in the fields of smart headlights, human-vehicle intelligent interactive lighting and machine vision; participated in investing in Israel's ViSiC company, actively deploying automotive high-power gallium nitride technology, making full use of its advanced packaging industry and technical capabilities to seize the industrial development opportunities of third-generation semiconductors in the field of new energy vehicles.
Lower the profit forecast and maintain the “buy” rating. The company was affected by the domestic epidemic and weak overseas consumption in the first half of the year, and CIS demand for mobile phones was suppressed. We lowered the net profit of 2022-2024 to 6/775/1,053 million (previously 701/914/1,183 million). Corresponding PE was 27/21/15X. We are optimistic that the company will maintain its “buy” rating in the automotive and emerging application fields in the future.
Risk warning: customer orders fall short of expectations; industry sentiment falls short of expectations; supply chain risks.