The 3Q22 performance is in line with our expectations
The company announced 3Q22 results: 3Q22 revenue was 378 million yuan, +11.04% year on year, +25.82% month on month; net profit of the mother was 49 million yuan, +2.34% year on year, +23.88% month on month. Revenue of 1-3Q22 was 1,022 million yuan, +1.04% year on year; net profit of the mother was 121 million yuan, -21.29% year on year. It met our expectations.
Development trends
The automotive electronics business supports steady revenue growth, and category expansion brings new volume. 3Q22 The company's revenue grew steadily over the same period. The main reasons were: 1) the automotive electronics business continued to expand, and the rapid transformation of previous projects supported performance; 2) Benefiting from the high boom in the passenger car industry, domestic passenger car sales reached 6.631 million units in 3Q22, +36.6%/+37.9% over the same period; 3) Product category expansion, new products such as filters, steering systems and electronic stabilization system components brought increased performance. We believe that with the targeted launch of the company's new energy and intelligent projects and the extension of superimposed product categories, it is expected to further support the company's revenue growth rate.
Business structural adjustments are putting pressure on profitability, and period cost management is strong. The company's 3Q22 gross margin was 29.09%, year-on-year -3.27ppt, month-on-month -1.64ppt, 1-3Q22 gross margin was 29.53%, year-on-year -4.63ppt, 3Q22 achieved a net interest rate of 12.9% to the mother, and -1.09ppt/-0.2ppt compared to the same period last year. The main reason for the decline in the company's profitability is 1) business restructuring, the increase in the volume of the automotive electronics business, and the decline in the share of consumer electronics business with high gross margins; 2) it will take a certain amount of time for new projects such as new energy and intelligence to be put into production, and the scale effect has yet to be realized. On the cost side, the prices of raw materials such as copper and plastic parts have eased somewhat. The company maintained strong control capabilities on the expense side. After excluding financial expenses, the cost rate during the 3Q22 period was -1.68ppt/-2.39ppt to 15.7% compared to the same period last month, and the inventory turnover rate in 3Q22 increased month-on-month, showing relatively steady operational resilience.
Cater to the trend of the intelligent electrification industry and continue to invest in R&D and mass production of related projects. The company's new energy customers are expanding vigorously, not only supporting major new energy customers such as Ningde Shidai, but also developing projects to enter a self-branded NEV supply system. In terms of intelligence, the company supplies Bosch's intelligent driving products to contribute to business growth through continuous innovation and development. The proportion of new energy vehicle and electricity projects established by the 1H22 company reached 31.25%, and the proportion of projects related to intelligent driving and smart cockpits reached 33.33%. 3Q22 The company's R&D expenditure rate reached 5.11%, +0.02ppt over the same period last year. We believe the company's continued investment in electrification and intelligent projects is expected to further expand the existing product matrix.
Profit forecasting and valuation
Due to the slowdown in the consumer electronics business, we lowered our 2022/2023 net profit by 17.5%/20.4% to 189 million yuan/236 million yuan. The current stock price corresponds to a price-earnings ratio of 34.1 times/27.4 times 2022/2023.
Maintaining an outperforming industry rating, we simultaneously lowered our target price by 12.3% to 19.30 yuan, corresponding to 33.1 times the price-earnings ratio in 2023. There is 20.9% upside compared to the current stock price.
risks
The price of raw materials fluctuated more than expected, the expansion of new projects fell short of expectations, and the decline in the consumer electronics business exceeded expectations.