Under the influence of the epidemic situation and the rising prices of raw materials in the first half of the year, the decline in the business of the parent company has obviously dragged down the overall performance, and Dongguan Sixiang still achieved good growth; in the follow-up, the development expectation of Dongguan Sixiang remains optimistic, and the pure water cooling equipment business is expected to pick up with the UHV bidding, and new businesses such as thermal management of energy storage and thermal management of data centers are expected to bring flexibility and maintain "buying".

The epidemic situation and other factors affect the performance significantly.

In the first half of the year, the company's income was 847 million yuan, an increase of 32.59% over the same period last year, and its net profit was 1.7845 million yuan, down 89.39% from the same period last year. The decline in performance is mainly due to the decline in the company's water-cooled business income and profits affected by the epidemic, rising prices of raw materials, and customer price reduction pressure in the first half of the year. as well as the company to accelerate the promotion of new energy vehicle thermal management, information and communications thermal management, energy storage thermal management and other business costs increased more.

Dongguan Sixiang: positive expansion and optimistic expectation

In the first half of the year, Dongguan Sixiang, a subsidiary of the company's new energy vehicle-related business, had an income of 616 million yuan, an increase of 88.01% over the same period last year, and a net profit of 51.53 million yuan, an increase of 33.52% over the same period last year. It still achieved good growth under the adverse effects of the epidemic and rising prices of raw materials. Among them, the revenue of power battery thermal management products increased by 161.18% over the same period last year, with a gross profit margin of 18.41%, down 10.72pct from the same period last year, and rising from 17.7% in the second half of last year. The revenue from 279 million yuan of electronic products for new energy vehicles increased by 48.48% over the same period last year, with a gross profit margin of 18.41%, down 1.25pct from the same period last year.

The company is actively expanding its production capacity. In May this year, the company announced that Dongguan Sixiang plans to sign the "Dongguan Sixiang Power Battery Thermal Management and Automotive Electronics Manufacturing headquarters Project Investment Agreement" with the people's Government of Wangniudun Town, Dongguan City. to raise self-raised funds to invest 700 million yuan in the construction of power battery thermal management and automotive electronics manufacturing headquarters project. In the first half of the year, the company's power battery thermal management and new energy automotive electronics manufacturing products produced 42.35 million PCS and 4.01 million PCS respectively, with a capacity utilization rate of 89% and 70%, and a capacity of 60 million PCS/ years and 6 million PCS / year under construction to support future development.

Pure water cooling: it is expected to pick up gradually in the second half of the year

In the first half of the year, due to the impact of the epidemic, investment in some projects was delayed, bidding was postponed, and the installed capacity of major customers shrank, resulting in delays in order signing and product delivery, while superimposed the impact of customer price reduction pressure, raw material prices and so on. The operating income and profits of the water cooling business have declined, and the parent company is simply calculated according to deducting the performance of Silicon Xiang. In the first half of the year, the income of the parent company of 231 million yuan decreased by 25.8% compared with the same period last year, and the net profit of the parent company was a loss of 24.5 million yuan.

According to the breakdown, the direct current water cooling income of 18.68 million yuan in the first half of the year decreased by 82.3% compared with the same period last year, and the gross profit margin increased by 10.11pct by 44.75%; the water cooling income of 46.49 million yuan from new energy power generation decreased by 59.9% year on year, and the gross profit margin decreased by 2.41% compared with the same period last year. 12.06pct Flexible AC water cooling income increased by 10.2% over the same period last year, gross profit margin decreased by 19.27% year-on-year 11.07pct, electric transmission water cooling income of 45.32 million yuan increased by 71.9% year-on-year, gross profit margin increased by 34.34% year-on-year 8.32pct, engineering operation and maintenance service income of 38.63 million yuan increased by 9.9% year-on-year, gross profit margin decreased by 53.80% 2.06pct.

With the mitigation of the impact of the epidemic, bidding in areas such as UHV is expected to gradually resume, leading to the recovery of pure water cooling equipment business. During the 14th five-year Plan period, the State Grid plans to build a total of 38 UHV projects of "24 traffic and 14 direct", and the construction of "four-traffic and four-direct" UHV project will be started again in 2022.

New business: energy storage / IDC thermal management brings flexibility

The company actively arranges energy storage thermal management, data center thermal management and other new areas, the industry space is broad, is expected to bring flexibility for the company.

At present, the energy storage company has technical reserves and solutions based on lithium battery single cabinet energy storage liquid cooling products, large energy storage power station liquid cooling systems, prefabricated cabin type energy storage liquid cooling products, etc. In the field of data center thermal management, the company can provide cold plate liquid-cooled server thermal management solutions, immersion liquid-cooled server thermal management solutions and container liquid-cooled data center solutions, covering from liquid-cooled plates, various models and forms of CDU, multi-power Tank, multi-size containers and other components to data center design, equipment integration, system commissioning, equipment operation and maintenance system integration.

Investment suggestion

Taking into account the higher-than-expected impact of the epidemic on the company's operation, the company's profit forecast is lowered, and the company's net profit from 2022 to 2024 is expected to be 0.80,1.35 and 181 million yuan, an increase of 23.45%, 68.98% and 34.52%, respectively, and maintain the "buy" rating.

Risk hint

The risk that the gross profit margin is lower than expected; the risk that bidding in UHV field is not as expected; the risk that energy storage and new areas of data center expansion are not as expected; the risk that Silicon Xiang's development is not as expected, etc.