1H22 performance is in line with our expectations
The company announced 1H22 results: revenue was 4.623 billion yuan, up 166.3% from the same period last year; net profit from home was 264 million yuan, up 155.3% from the same period last year; in a single quarter, 2Q22 revenue was 3.071 billion yuan, up 160.4% from the same period last year, and net profit from home was 200 million yuan, up 146.0% from the same period last year.
Lithium power business is growing at a high speed, and gross profit has declined. 1H22 lithium equipment revenue of 4.41 billion yuan, an increase of 175.38% over the same period last year, is the company's main source of income. 1H22's comprehensive gross profit margin was 19.4% lower than the same period last year, mainly due to higher raw material prices, higher labor costs, and bulk order shipments, which were higher than the increase in revenue. We expect that in the future, with the stabilization of raw material prices and the improvement of human efficiency, gross profit margin is expected to be repaired quarter by quarter.
The ability of cost control has been enhanced, and the number of newly signed orders for lithium power has increased. The rate of sales, management and R & D expenses of 1H22 decreased by 3.5/2.7/3.0ppt compared with the same period last year, and the net profit margin decreased by 0.2ppt to 5.7%, and the single-quarter net interest rate decreased by 0.4ppt to 6.5%. By the end of the 1H22 period, the company's inventory balance / contract liabilities increased by 31.5% 12.6% compared with the same period last year. The net cash flow of 2Q22's operating activities was 354 million yuan, a decrease of 25 million yuan compared with the same period last year, mainly due to the increase in cash payment costs due to the increase in notes payable.
Trend of development
Downstream demand is booming, and the production and sales of new energy vehicles are growing rapidly. According to the China Automobile Association, the production and sales of 1H22 new energy vehicles in China were 2.748,000,000 respectively, an increase of 114.0% and 115.6% over the same period last year. According to the China Automobile Association, sales of new energy vehicles are expected to exceed 5 million in 2022, and the expansion of downstream battery plants is expected to maintain a high scale.
Lithium battery manufacturers accelerate their production expansion, and equipment bidding is expected to maintain a high growth. According to GGII data, 1H22 has a total of 9 global power and energy storage battery production projects, with a total capacity exceeding 118GWh, 21 contracted and planned projects, with a total capacity planning of more than 367GWH, and 22 projects started, with a total capacity planning exceeding 638GWh. At present, the company has five major production bases in Huizhou, Guangdong, Dongguan and Yichun, Jiangxi, and the annual output value is expected to exceed 13 billion yuan in 2022. We expect the company to benefit from the accelerated pace of production expansion downstream and achieve rapid performance growth.
Profit forecast and valuation
Taking into account the downside of gross margin, we cut our 2022 30.1x/18.7x 2023 EPS forecast by 13% to 0.88 30.1x/18.7x 1.41 yuan, and the company's current share price corresponds to 2022 Universe 2023. Taking into account the decline in profitability and the good development prospects of lithium devices, we lower the target price by 10% to 28.80 yuan, corresponding to the 2022 32.9x/20.5x 2023 32.9x/20.5x P Bank E, which has 9% upside space and maintains a neutral rating.
Risk
Downstream bidding is not as expected; capacity expansion is not as expected.