3Q22 performance is in line with our expectations
The company announced 1-3Q22 results: revenue of 10.994 billion yuan, an increase of 18.15%; net profit of 336 million yuan, an increase of 78.20%; and a net profit of 312 million yuan, an increase of 91.28%. Of this total, 3Q22's revenue was 3.842 billion yuan, with an increase / month-on-month decrease of 4.0%, 4.5%, and a net profit of 148 million yuan, which was 16.3% higher than that of the previous month, with 150 million yuan of non-net profit deducted from the same increase / ring increase of 30.6% and 12.8%. The company's 1-3Q22 performance met our expectations.
Trend of development
3Q22 grid investment remains high, and power cable business shipments are expected to continue to grow at a high rate. Based on the statistics of China Power Union, we estimate that 3Q22 grid investment is about 124.9 billion yuan, an increase of 7.9% over the same period last year, maintaining a high level; benefiting from the high level of grid investment, we estimate that the company's 3Q22 power cable shipments still achieve about 8-10% growth; however, due to the impact of the decline in 3Q copper price and the linkage between the terminal price of the company's power cable products and copper price, we estimate that the revenue growth rate has been pulled down.
Polymer materials continue to develop, the company actively expand the field of ultra-high pressure, medium-term domestic replacement can be expected. The downstream applications of the company's polymer materials are mainly power cable insulation and sheath materials, of which 90% are exported; benefit from:
1) the uptrend of power grid investment; 2) the continuous release of production capacity in Huzhou; 3) the continuous optimization of structure, the increase in the proportion of shielding materials and ultra-high pressure materials with good profitability, we estimate that 3Q22 revenue and profits have achieved good growth. At present, the company is already a leader in the domestic medium and low voltage segment, and we expect its share to be close to 30% (2021). At the same time, the company is actively expanding its ultra-high pressure business above 220KV (mainly supported by foreign investment at the present stage). The first phase capacity of 20,000 tons has been completed and put into production, and the second phase of the company plans to be completed and put into production in 2022 to support the growth of ultra-high pressure products in 2023. We believe that the better profitability of ultra-high pressure products is expected to drive the continuous improvement of gross profit margin of polymer materials business. Looking forward to the medium term, we expect that the commissioning of the company and Wanhua integration project is expected to further reduce costs and improve product quality stability, helping the company to replace domestic products in the middle and high-end markets.
The charging business has developed steadily, and the distribution of new energy has continued to develop. The company's charging capacity and operating efficiency have improved steadily, and the company's 3Q22 has reached 122 million degrees of charging, an increase of 11.9 percent over the same period last year. As of 9M22, the number of public charging piles in the company was 25843, an increase of 53.9 percent over the same period last year, of which 14510 were direct current, an increase of 41.9 percent over the same period last year, and 2259 charging stations. The company has initially built an "intelligent urban fast charging network", which will continue to improve the charging efficiency of stations and increase the density of outlets.
Gross profit increased compared with the previous month, while operating cash flow picked up. 3Q22 achieved a comprehensive gross profit margin of 13.96%, with the same increase / annular increase of 1.0ppt/0.8ppt, we believe that the main reasons are: 1) saturated production schedule, increased capacity utilization; 2) optimization of polymer business product structure. The company's 3Q22 sales / management / financial expense rates are 3.2%, 2.2%, 0.3%, 0.3%,-0.1ppt, 0.3ppt, 0.5ppt, respectively; the operating cash flow 3Q22 is 1.465 billion yuan, an increase of 405.9% over the same period last year, and a month-on-month increase in cash flow.
Profit forecast and valuation
We maintain our 2022 / 2023 earnings forecasts of RMB 4.37 and RMB 583 million, and the current share price corresponds to 22.2 times / 16.6 times of 2022 / 2023. Maintain an outperform industry rating and a target price of 12.5 yuan, corresponding to 29.7 times / 22.3 times Pamp E in 22am 23, which is 33.4% upside compared to the current stock price.
Risk.
With the macroeconomic downturn, the number of new energy vehicles fell short of expectations, and the price of raw materials rose higher than expected.