Overview of events

According to the semi-annual report released by the company, 2022H1 realized operating income of 2.377 billion yuan, an increase of 61.48% over the same period last year, and realized a net profit of 160 million yuan, down 4.07% from the same period last year. Among them, the single-quarter revenue of 2022Q2 is 1.089 billion yuan (yoy+29.75% qoq-15.41%), and the net profit of returning home is 47 million yuan (yoy-45.65%,qoq-58.79%).

Analysis and judgment:

1. Income side: smart family business drives rapid growth of performance

(1) Smart home and 5G communications business: 2022H1 achieved an operating income of 1.87 billion yuan in this field, an increase of 84.06% over the same period last year.

Among them, smart home business products are divided into two categories, one is broadband network terminal equipment, 2022H1 sales of this device increased by 870000 to 6.19 million, business income increased by 39.52% compared with the same period last year; second, IoT pan-intelligent terminal equipment.

5G communication service products mainly include 5G base station antennas, 5G small base stations and OTN equipment. The company's 5G antenna products have been shipped on a large scale, and officially cut into the 5G small base station market, and continue to expand its product line (2) mobile reading business: 2022H1 achieved business income of 502 million yuan in this field, an increase of 10.91% over the same period last year.

2. Cost side: profitability is under pressure, and the ability to control expenses is good.

Profitability 2022H1's gross profit margin fell to 12.56% (yoy-6.81pct), including 10.41% (yoy-2.30pct) for smart family and 5G communications and 20.60% (yoy-13.76pct) for mobile reading. 2022H1 achieved a net return rate of 6.72% (yoy-4.59pct), which shows that the company's profitability is under pressure and cost control needs to be improved.

The sales / management / financial expense rate of 2022H1 is 0.39% 1.47%, respectively, 1.57%, year-on-year change-0.11/0.76/0.21pct, in which the change in financial expenses is mainly due to the increase in the scale of the company's external financing in the current period. The company's R & D investment fell 4.94% to 28 million yuan in the first half of the year compared with the same period last year, and the R & D expenditure rate dropped 0.82pct to 1.16% compared with the same period last year, indicating that the company's expense rate is basically stable.

3. The release of the "double gigabit" wave is positive, and the number of 2022H1 Gigabit optical network users in smart families has maintained a high growth, with a year-on-year growth rate of 329% in the first half of the year, but the overall penetration rate is low at 10.90%. There is a lot of room for improvement.

With the acceleration of gigabit optical network construction, intelligent home terminal equipment is facing a large-scale iterative upgrade, and there is a huge market demand scale. The company has carried out a comprehensive upgrade iteration of the equipment, and built a series of 10GPON products and omni-directional WiFi6 routing solutions around the "Gigabit Optical Network". At present, the two major products have been shipped in batches, and FTTR products have been developed and entered the self-test stage.

We believe that the wave of "double gigabit" network development has brought huge development opportunities to the company. in the case of demand upgrading and huge demand gap, the company is expected to seize a place by virtue of product quality advantage and mass production price advantage.

4. The advantages of operators' customers are highlighted, and the scale of smart family business continues to expand. The company's smart home business is ToB sales, and the customers are mainly domestic communication operators. In the context of operators to further strengthen the layout of smart families, the company's smart family business to expand the market. By the end of June 2022, Shenzhen Zhaoneng had won the bid for a total of about 11.53 billion yuan and outstanding orders for about 5.962 billion yuan, further expanding the share of the company's products among the operators, maintaining the first echelon suppliers of China Mobile Limited and China Telecom Corporation. At the same time, the company actively carries out DICT business, helps operators to expand the government-enterprise market, and provides "DICT" comprehensive solutions and services for operators' government-enterprise customers.

5. Expand new industries such as energy storage and meta-universe, and create new profit growth points. Based on existing advantages, the company actively explores market opportunities in energy storage, metacosmos and other fields. In terms of energy storage, the company re-explored the customer resources of existing communication operators and signed a cooperation agreement with Yineng Energy in July to jointly build a distributed energy storage cloud platform, mainly using the peak-valley electricity price difference to generate revenue. In addition, government subsidies on the demand response side can be obtained. In terms of meta-universe, the company signed a cooperation agreement with Zhejiang Mobile Hangzhou Branch in July to provide it with "Xiao Pang Shuo Yun" virtual digital human service, which is the first time that the company's business has been marketed.

We believe that the distributed energy storage cloud has a broad development prospect, which can not only achieve the effective extension of the industrial chain on the basis of the existing advantages, but also cut into the new energy track, and is expected to accelerate the layout with the help of the cooperation advantages of operators. In addition, we believe that the company will accelerate the commercialization of virtual human and continue to expand the scene to gain new growth momentum.

6. Investment suggestions

Taking into account the execution of the company's follow-up orders and new orders, the profit forecast remains unchanged. It is estimated that the revenue for 2022-2024 will be 45.5 and 5.58 billion yuan, respectively, and the earnings per share will be 2.14, 2.63 and 2.97 yuan, respectively. Corresponding to the closing price of 37.3 yuan per share on August 30, 2022, the PE will be 17.4, 14.2 and 12.5 times, respectively, and the company's "overweight" rating will be maintained.

7. Risk hint

Customer concentration risk; competition aggravating risk; epidemic aggravating risk; uncertainty of framework agreement; systemic risk.