3Q22 performance is basically in line with our expectations.
The company announced its results for the third quarter of 2022: revenue in the first three quarters was 10.819 billion yuan, an increase of 17.71% over the same period last year; net profit from home was 551 million yuan, up 15.70% from the same period last year; and net profit from non-return was 503 million yuan, up 18.72% from the same period last year. Corresponding to the single quarter of 3Q22, the company achieved operating income of 4.124 billion yuan, an increase of 5.61% over the same period last year, an increase of 10.11% over the same period last year, and a net profit of 239 million yuan, an increase of 5.07% over the same period last year, and an increase of 23.32% over the previous quarter.
The single-quarter gross profit margin improved compared with the same period last year, and the expense side as a whole increased. 3Q22's gross profit margin was 35.6%, up 2.3ppt from the same period last year. We think this is mainly due to the rapid growth of enterprise-class network equipment business with high gross margin. The company's expense side showed an overall upward trend, and the 3Q22 sales / management / R & D expense rate increased to 11.6%, 3.5% and 13.6% respectively compared with the same period last year, mainly due to the increase in the company's business scale, while the financial expenses decreased by 763% compared with the same period last year. This is mainly due to the higher exchange earnings of the company's export network equipment and communication products due to exchange rate fluctuations. 3Q22 achieved a net interest rate of 5.8%, the same as the same period last year. Looking back, we expect revenue to grow rapidly in the fourth quarter, as a traditional peak season, but expect a small increase in net interest rates for the whole year, given the high fees typically incurred in the fourth quarter of the historical year.
Trend of development
The company has a leading share of enterprise-class network equipment and network terminal products, with a stable growth rate. Specific to the subsidiary, 1) Ruijie Network: the company's network equipment products continue to maintain a leading position in the industry. According to the market share of IDC,2Q22 Ruijie switch in China, the market share of Ruijie switch ranks first in TOP3, the market share in general education industry ranks first (52.2%), and enterprise VLAN products rank first in the market share of operators and service industry. We judge that with the gradual recovery of customer demand in some industries of the company, the company's orders and shipments are expected to continue to increase, and the operation will maintain a steady growth trend. 2) Shengteng Information: according to the market share of IDC,1H22 Shengteng thin client and desktop cloud terminal products continues to lead the industry, the company announced that Shengteng successfully won the bid for China Telecom Corporation cloud computer terminal centralized procurement project in 2022, and we believe that the company is expected to fully benefit from the wave of digital transformation of Qianhang Baiye. 3) Star Network Wisdom: the company continues to increase R & D investment, product competitiveness continues to improve, successfully selected in Xiamen "specialized special new" list of small and medium-sized enterprises.
The completion of the third phase of the Haixi Park project will help the company to expand production and improve efficiency. The company announced that the third phase of the science and technology park base project was completed in the third quarter. The science and technology park has created a management platform for the wisdom park, with higher management efficiency and lower energy consumption. We expect the company's production capacity to be released in the fourth quarter, which is conducive to meeting the demand for downstream orders.
Profit forecast and valuation
In view of the fact that the company's R & D expenditure is higher than we had expected, and with the increase in deductible temporary differences, the annual deferred income tax expense is expected to decline, so we reduce the 23-year net profit of 2022 by 9% to 702 million yuan / 966 million yuan. The current share price corresponds to a 23-year price-to-earnings ratio of 17.6 times / 12.8 times earnings. Maintain the outperform industry rating, taking into account the industry valuation window switch, maintain 28.90 yuan list price, corresponding to 24.0 times 2022 price-to-earnings ratio and 17.4 times 2023 price-earnings ratio, there is 36.2% upward space compared with the current stock price.
Risk
The procurement of domestic telecom and Datong market is not as expected; the recovery of customer demand in government and enterprise industries is not as expected.