Event: the company released its quarterly report for 2022, with operating income of 18.718 billion yuan in the first three quarters, an increase of 13.80% over the same period last year; net profit of 697 million yuan, down 1.65% from the same period last year; and net profit of 711 million yuan, an increase of 0.78% over the same period last year.

The downturn in the industry affects the size of revenue, innovative business and structural growth of some distribution businesses. In the third quarter, the company achieved operating income of 5.492 billion yuan, down 15.00% from the same period last year and 25.36% from the previous year; the net profit returned to the mother was 175 million yuan, down 36.36% from the same period last year. The prosperity of the electronic components industry declined further in the third quarter (according to SIA data, monthly global semiconductor sales all declined month-on-month in June, July and August 2022), the demand for electronic components for consumer electronics products such as mobile phones remained in the doldrums; at the same time, the company took the initiative to optimize its business structure and shrink some of its low gross margin business scale. In the third quarter of 2022, the Internet business of the electronic components industry with high gross profit margin and the authorized distribution business of electronic components in electric vehicles, photovoltaic and other areas still maintained year-on-year growth.

Internal and external factors influence the profit level to decline periodically, and the cash flow performance improves significantly. Affected by the slowdown of global economic growth, repeated epidemics and the alternation of new and old innovation cycles in the electronics industry, the demand for most electronic components declined and entered the inventory cycle in 2022, which reduced the company's gross profit margin to some extent. The company's overall gross profit margin in the first three quarters of 2022 was 10.57%, down 1.03 pct from the same period last year. At the same time, the company takes the initiative to assume social responsibility, and the physical trading market business reduces part of the rent of the lessee. In the first three quarters, the expenditure rate during the period was 5.26%, an increase of 0.47pct over the same period last year, mainly due to an increase of 68.46% and 25.41% in R & D and management costs. At the same time, the company accelerated its business turnover in 2022 and recovered more pre-payment, and the net cash flow generated by operating activities in the first three quarters increased by 358.24% compared with the same period last year.

Investment advice: adjust the company's profit forecast according to the latest industry situation and company performance data. We predict that the company's return net profit in 22-23 will be 9.33 yuan and 1.089 billion yuan, with the current PE of 13 and 11X, maintaining the company's "buy" rating.

Risk tips: the prosperity of the electronic components industry is not as expected; the Internet business development of the electronic components industry is not as expected and the risk of IPO listing failure.