Event: the company released its quarterly report of 2022 on October 25, with revenue of 660 million yuan and YoY+ of 23.4% in the first three quarters; net profit of 250 million yuan and 41.3% of YoY+; deducting 220 million yuan of non-net profit, YoY+31.7%. The overall performance is in line with market expectations. The company continues to focus on precision guidance core business, strengthen cost control, net interest rate has improved, our comprehensive comments are as follows:
3Q22's revenue is up 48%; profit margins are down significantly. 1) in a single quarter, the company's 3Q22 achieved revenue of 220 million yuan, YoY + 48.4%; net profit of 50 million yuan, YoY-10.7%; deduction of non-net profit of 40 million yuan, YoY-22.8%. 2) profitability: the gross profit margin of 1~3Q22 is 44.5%, down 3.1 ppt from the same period last year; the net profit rate is 37.4%, an increase of 4.8ppt over the same period last year. 3Q22 gross profit margin was 35.7%, down 16.0ppt from the same period last year; net profit rate was 24.6%, down 16.3ppt from the same period last year. Cost-side growth is the main reason why profit margins are under pressure.
The ability of cost control continues to improve, and the net cash flow of operation has improved significantly. During the 1~3Q22 period, the expense rate decreased by 4.2ppt to 6.3% compared with the same period last year, of which: 1) the sales expense rate was 0.4%, which was 1.2 ppt% lower than the same period last year; 2) the management expense rate was 3.9%, and 0.8% less than the same period last year; 3) the financial expense rate was-2.2%, compared with 0.6% in the same period last year, which was due to the increase in interest income. 4) the R & D expenditure rate is 4.2%, an increase of 0.6ppt over the same period last year, and R & D expenditure is 27 million yuan, an increase of 44.3% over the same period last year. The company continues to focus on the development of millimeter wave microsystems, and the product performance is at the leading level in the industry. By the end of 3Q22, the company: 1) accounts receivable and bills 260 million yuan, down 57.3% from the beginning of the year, due to rebates due to merchant tickets; 2) prepayments of 15 million yuan, reduced by 61.8% from the beginning of the year, due to optimization of supply chain and reduction of prepayments; 3) inventory of 1.14 billion yuan, an increase of 99.5% compared with the beginning of the year, due to the expansion of production scale and the increase of reserve materials. 4) the contract liability is 120 million yuan, a decrease of 10.0% compared with the beginning of the year. The net cash flow of 1~3Q22 's operating activities was 310 million yuan, an increase of 270.6% over the same period last year, due to the increase in sales rebates.
The implementation of equity incentives in 2022 demonstrates confidence in future development. On September 15th, the company issued a draft equity incentive for the first time since its listing in August 2021, with a proposal to grant no more than 3.6 million shares (2.1 per cent of the total share capital) to no more than 101 people. On October 10, the company awarded 3 million shares to 101 people for the first time at a price of 34.56 yuan per share. The unlocking condition is based on revenue / net profit in 2021, and the growth rate in 2022 is not less than 20%. The cumulative growth in 2022 is not less than 160% and the cumulative growth in 2022 in 2024 is not less than 340%. The cumulative growth in 2022 is not less than 540% in 2025. The amortization fee is 160 million yuan for the first time, and 20.24 million yuan, 71.29 million yuan, 37.39 million yuan, 19.53 million yuan and 7.33 million yuan respectively for 2022-2026.
Investment advice: the company mainly specializes in customized millimeter wave microsystems, focusing on the precision guidance business sector (98% of revenue in 2021), and the core products have started rapidly since they were finalized in 2019. In February 2022, the company signed a large contract of 2.4 billion yuan, supporting the follow-up performance growth. In October 2022, the company implemented equity incentives, demonstrating its firm confidence in long-term development. We estimate that the company's net profit from 2022 to 2024 will be 387 million yuan, 583 million yuan and 851 million yuan respectively. The current stock price corresponds to 36x/24x/16x in 2022-2024 PE.
Taking into account the company's technological advantages and the future development space of the industry, we will give 30x PE,2023 in 2023 with an annual EPS of 3.34yuan and a corresponding target price of 100.20 yuan. Maintain the recommended rating.
Risk tips: market demand is not as expected, new product research and development is not as expected, etc.
