Main points of investment

The performance continues to grow. According to the company's mid-2022 report, the company achieved operating income of 1.96 billion yuan in the first half of the year, an increase of 21% over the same period last year, a net profit of 137 million yuan, an increase of 381% over the same period last year, and a net profit of 134 million yuan, an increase of 851% over the same period last year. Of this total, Q2's single-quarter income was 906 million yuan, an increase of 2% over the same period last year, and its net profit was 52.08 million yuan, an increase of 117% over the same period last year.

The product structure continues to improve, and the proportion of new energy vehicle business increases. In the first half of the year, the company's overall gross profit margin was 23.32%, an increase in 2.92pct compared with the same period last year, mainly benefiting from the improvement of product structure. In terms of products, the revenue of smart terminal products was 1.125 billion, up 32% from the same period last year, and the gross profit margin increased to 20.72% from the same period last year, mainly due to the increase in the proportion of big customers in the head and the decline in the proportion of middle and low-end customers. Revenue from new energy vehicle products was 548 million, up 53 per cent from the same period last year, while gross profit margin fell slightly to 28.96 per cent from the same period last year. Information storage revenue was 272 million, down 21% from the same period last year, and the gross profit margin was stable at 23.71%.

Major consumer electronics customers continue to grow. It is not easy for the company to achieve growth because of the poor demand in the domestic and foreign mobile phone market in the first half of the year. Looking forward to the second half of the year, with the release of new models for major customers and the easing of unfavorable factors such as the epidemic situation, demand is expected to start a warming trend in the traditional peak season in the third or fourth quarter, leading to the improvement of the company's traditional business. The company disclosed that the current consumer electronics orders are sufficient, and the production and operation continues to develop upward according to the normal quantity of orders.

New energy vehicle business is growing rapidly, and there are many new services such as wireless charging, VR, hydrogen fuel cell and so on. The company entered the new energy vehicle market earlier, and its revenue share continued to rise from 5.98% in 2019 to 27.96% in the first half of 2022. In the future, the company is expected to continue to benefit from the prosperity of the industry and the advantage of key customers to maintain high growth. At the same time, in order to consolidate and enhance the cooperative relationship with new energy vehicles / energy storage international customers, the company has invested in the United States and Germany to build factories and nearby supporting services, and is expected to begin to contribute revenue in the first quarter of 2023, providing the basis for the growth of this business direction. VR business, starting from 2021 for the international mainstream customers mass production of precision functional parts and precision structural parts.

Wireless charging business can produce high-power wireless charging system for forward-looking new energy vehicles, which is authorized by WiTricity patent, and will start small batch production of designated projects in the second half of 2022. The hydrogen fuel cell business aims at the next generation of clean power vehicle technology, R & D and production of metal bipolar plates, the core components of which are currently under construction in small quantities. In the first half of the year, Ansdick, a holding subsidiary, was set up to develop the core components of hydrogen fuel cell. Make reserves in advance for downstream outbreaks.

[investment advice]

The company has long served the leading customers at home and abroad, gradually expanding from consumer electronics to new energy vehicles, VR and other emerging fields, products gradually from parts to components, modules and even the whole machine integration development, steadily building a platform precision manufacturing company. We are optimistic about the recovery of consumer electronics demand, and expect the high growth of new energy vehicle business to continue, while the company's wireless charging, VR, hydrogen fuel cell and other new businesses have entered the stage of mass production, which is expected to fully share the potential explosion opportunities of the industry in the future. It is estimated that the company's operating income from 2022 to 2024 will be 45.89, 56.12 and 6.71 billion, respectively, and the net profit will be 3.55, 4.46 and 553 million yuan, respectively, and the corresponding EPS will be 0.52, 0.65 and 0.81, respectively, and the corresponding PE will be 0.81 times of 25-20-16, respectively, maintaining the "over-holding" rating.

[risk Tip]

The growth of downstream demand of consumer electronics is less than expected.

The demand for new energy vehicles is not as good as expected.

The progress of new product research and development is not as expected.

The increase in gross margin was not as good as expected.