3Q22 performance is in line with our expectations
The company announced 3Q22 results: revenue in the first three quarters was 12.012 billion yuan, down 2.08% from the same period last year; net profit from home was 575 million yuan, up 11.32% from the same period last year; and non-net profit from home was 612 million yuan, up 314.42% from the same period last year, basically in line with our previous expectations. Corresponding to Q3 single quarter, the company achieved operating income of 4.46 billion yuan, an increase of 3.43% over the same period last year; net profit of 120 million yuan, down 50.90%; and non-net profit of 383 million yuan, an increase of 385.08% over the same period last year.
Performance concerns: 1) in the face of the complex macroeconomic environment and RMB exchange rate fluctuations and other factors, the company's Q3 single-quarter income returned to the positive growth channel, and the business showed good development resilience; 2) 3Q single-quarter gross profit rose to 13.87% year-on-year / month-on-month, driving the overall non-net profit to increase. However, due to the changes in the fair value of financial derivatives, the profit and loss of fair value changes decreased from 329 million yuan in 3Q21 to-622 million yuan in 3Q22, which dragged down the return net profit.
Trend of development
Storage semiconductor closed test capacity expansion is smooth. The company is actively expanding the closed testing capacity of storage semiconductors. Peyton in Hefei was put into production in December 2021 and passed ISO9001/14001/45001 and other system certification in 1H22 and mass production audit of existing customer packaging products. The company expects to achieve full production from the end of 2023 to early 2024, and the total monthly production capacity is expected to reach 120,000 pieces per month. We believe that as the company's storage semiconductor closed test capacity climbs, the storage business is expected to become a major growth driver.
The development of high-end manufacturing and measurement intelligent terminals is steady. In high-end manufacturing, the company completed the divestiture of its consumer electronics manufacturing business in April 2022, focusing on the scope of high-end manufacturing business, and orders for manufacturing businesses such as medical products, printers and intelligent lawn-mowing robots continued to expand. In terms of intelligent measurement terminals, as of 1H22, more than 80 energy companies in 33 countries around the world have provided more than 72 million intelligent measurement products and solutions. We can see that the company's smart meter business has made a breakthrough in the domestic market. In June 2022, the company won the bid for Class A single-phase smart meter project for the first time in the 30th batch of watt-hour meter procurement project of State Grid in 2022, and the general contract project of distribution network and metering system engineering in Tajikistan in August, which is one of the largest distribution and metering system projects in Central Asia. At the same time, the company won the bid for Pakistan large-scale smart meter renovation project. We believe that with its long-term accumulation in the field of intelligent measurement, the company continues to win major orders at home and abroad, which is expected to provide support for business growth.
Profit forecast and valuation
We maintain net profits of 862 million yuan and 1.091 billion yuan in 2022 and 2023. The current share price corresponds to 21.0 times 2022 earnings and 16.6 times 2023 earnings. Maintain the outperform industry rating and maintain the target price of 14.00 yuan, corresponding to 25.3 times 2022 price-to-earnings ratio and 20.0 times 2023 price-to-earnings ratio, which has 21% upward space compared with the current stock price.
Risk.
The localization of memory chips is not as expected, and the market demand of memory chips is not as expected.