1H22 performance is slightly lower than we expected.
1H22 achieved revenue of 712 million yuan, year-on-year-2.4%, return to the mother net profit of 118 million yuan, year-on-year-8.9%, deducting non-net profit of 99 million yuan,-19.9%. Corresponding to the company's 2Q22 income of 303 million yuan, year-on-year / month-on-month ratio-16.8% / month-on-month ratio-16.8% / month-on-month ratio-25.9%; return to the mother net profit of 36 million yuan, year-on-year / month-on-month ratio-43.1% / month-on-month ratio-56.4%; deduction of non-net profit of RMB 22 million, year-on-year / month-on-month ratio-63.3% / month on month-on-month ratio-70.9%. Due to the sharp decline in demand for commercial vehicles, rising raw materials and other factors, the annual performance of 1H22 is lower than expected.
Trend of development
The sharp decline in heavy truck sales of commercial vehicles compared with the same period last year led to a decline in revenue, differential business began to expand, aviation business improved. Due to the high inventory of commercial vehicle terminals, slow infrastructure progress and oversupply under the influence of the epidemic, 1H22 domestic commercial vehicle sales are-41.2% year-on-year, of which heavy truck sales are-64% year-on-year. The company's commercial vehicle business was affected, with revenue of-49% compared with the same period last year. The revenue of the differential business 1H22 is about 70 million yuan, and we expect the annual revenue to reach about 300 million yuan with the gradual climbing of production capacity. In addition, the aviation business is growing rapidly, with 1H22 recording revenue of 120 million yuan, a year-on-year increase of 67%.
The proportion of heavy truck business with high gross margin has declined, the investment in R & D has increased, and the differential business is still at a loss stage, which puts pressure on the company's profitability. The company's 2Q22 gross profit margin is 35.0%, which has declined compared with the previous month. We think that the main factors are: 1) the proportion of revenue from heavy truck business with high gross margin has declined; 2) the differential business is in the climbing stage, and 1H22 recorded a loss of about 12 million yuan. The expense rate during 2Q22 is 20.7%, year-on-year / month-on-month + 3.13ppt/+6.7ppt, mainly because the company continues to increase investment in scientific research and promote the upgrading and transformation of products and technologies. In the same period, the R & D expense rate is 10.3%, year-on-year + 4.65ppt, month-on-month + 5.2ppt. Looking forward, we expect the 2H22 demand of the heavy truck industry to recover from the previous month, the profit improvement brought about by the expansion of the sales scale of the differential business, and the month-on-month recovery of revenue and profit in the second half of the year.
Differential production capacity construction continues, the product matrix is expected to be extended; it is optimistic that aviation business will thicken the company's profits. The company's layout differential assembly is self-made in the whole industry chain, including gear and shell casting and machining. we believe that the high self-control rate is expected to bring the cost advantage of quotation. The differential assembly project is planned to produce 5 million sets of production capacity in 2025 and 10 million sets in 2030. In addition, the company continues to lay out the research and development of new energy-related components based on differential, and the company believes that the product matrix is expected to continue to expand.
Under the background of the "14th five-year Plan", the company's aviation business orders are relatively abundant, the factory area of the economic development area of Chengdu already has mass production capacity, and the base of Xindu Aviation Industrial Park has also initially formed production capacity, which brings guarantee for the improvement of income scale. Considering the strong profitability of the aviation business, we expect that with the increase in its revenue scale, the overall profit margin is expected to rise.
Profit forecast and valuation
Keep profit forecasts for 2022 and 2023 unchanged. The current share price corresponds to 15.8 times 2023 / 11.3 times Pdebase E in 2023. Maintain the outperform industry rating and maintain the SOTP target price (excluding rights) of 18.0 yuan, corresponding to 2022max 2023 23.6x / 15.9x Pmax E, which has 49.4 per cent upside compared with the current stock price.
Risk
The price of raw materials rose more than expected, and the AMT penetration rate of heavy trucks fell short of expectations.