Event: On August 26, 2022, the company released its 2022 semi-annual report. In the first half of 2022, the company achieved operating income of 847 million yuan, an increase of 32.59% over the previous year; it achieved net profit of 1.7845 million yuan, a year-on-year decrease of 89.39%.
The rapid growth of the automobile business led to an increase in revenue, and net profit margin was under pressure: in the first half of 2022, due to the pandemic, investment in some projects was delayed, tenders were delayed, and the installed capacity of major customers shrank. As a result, the company's order signing and product delivery were delayed, and the company's water cooling business orders declined. However, at the same time, the subsidiary Dongguan Sixiang's orders and revenue increased significantly. The revenue of power battery thermal management products increased 161.18% year on year, and the revenue of electronic manufacturing products for new energy vehicles increased by 48.48% year on year. The company achieved revenue of 847 million yuan in the first half of 2022, an increase of 32.59% over the previous year; of these, 2022Q2 achieved revenue of 424 million yuan in a single quarter, an increase of 20.53% over the previous year. Affected by customer price reduction pressure and a sharp rise in raw material prices, the company achieved a gross profit margin of 21.18% in the first half of 2022, a year-on-year decline of 7.58 pct. The supercompany accelerated the promotion of NEV thermal management, information and communication thermal management, and energy storage heat management businesses, which led to a large increase in expenses during the period and a decline in the company's profits. Net profit for the second half of 2022 was 1.78 million yuan, a year-on-year decrease of 89.39%. Among them, net profit for the 2022-Q2 quarter was 6.5053 million yuan, a year-on-year decrease of 153.24%. The company achieved a net interest rate of 2.98% in the first half of 2022, a year-on-year decline of 2.43 pct. It is expected that in the second half of the year, as customer order delivery progress resumes and raw material prices fall, Dongguan Guixiang's production capacity will continue to increase, and the company's profitability will steadily rise.
The equity incentive plan shows the company's confidence: On May 20, 2022, the company issued the “2022 Restricted Stock Incentive Plan (Draft)”, which plans to award 3,37156 million restricted shares to directors, senior management, and core key personnel of the company (including subsidiaries), accounting for about 1.20% of the total share capital, and the grant price is 4.80 yuan/share. The performance assessment target is based on 2021 net profit, and the net profit growth rate for 2022-2024 is not less than 25%, 50%, and 80%. This incentive plan binds directors, executives and core personnel, fully demonstrating the company's confidence in future development.
Invest 700 million yuan to build and manufacture a new energy vehicle headquarters project: On May 20, 2022, the company issued an announcement announcing that Dongguan Guixiang plans to sign the “Dongguan Guixiang Power Battery Thermal Management and Automotive Electronics Manufacturing Headquarters Project Investment Agreement” with the People's Government of Wangniudun Town, Dongguan, to raise RMB 70,000 million to invest RMB 70,000 million in the construction of a power battery thermal management and automotive electronics manufacturing headquarters project.
The total land area of the project is 48120.97 square meters, and the estimated total construction area is about 168,000 square meters. It will mainly build production plants, employee dormitories and supporting facilities for power battery thermal management and automotive electronics manufacturing products. The construction period for the project was 24 months. As of H1 in 2022, Dongguan Guixiang's power battery thermal management and new energy vehicle electronics manufacturing business had achieved production capacity of 47.5 million pieces and 5.75 million pieces, respectively, and production capacity under construction was 60 million pieces and 5 million pieces, respectively. This foreign investment helps the company integrate and optimize resources, improve production efficiency and scale effects, meet the rapidly growing demand for related product orders, and enhance the company's overall competitiveness.
Investment suggestions: The company is a leading domestic pure water cooling equipment enterprise, and the NEV business is developing rapidly. We expect the company's operating income from 2022 to 2024 to be 20.74/27.94/3.802 billion yuan, up 23.5%/34.7%/36.1% year on year; net profit for homo was 0.81/1.05/131 million yuan, respectively, up 26.2%/29.2%/24.2% year on year; corresponding EPS was 0.28/0.36/0.44 yuan, respectively.
We gave the company 49 times PE in 2022, corresponding to the target price of 13.72 yuan, and maintained “buy-A”
Investment ratings.
Risk warning: Risks that the new installed capacity of wind power falls short of expectations, increased competition leads to a decline in gross margin, unfavorable acquisition and integration, development of the NEV business falls short of expectations, and assumptions fall short of expectations
