Performance review
Principal Century 3Q22 performance is in line with our expectations
Principal Century announced 3Q22 results: revenue in the first three quarters of 2022 was 310 million yuan, up 20.6 percent from the same period last year, and net profit was 54.42 million yuan, up 9.9 percent from the same period last year. In a single quarter, the revenue in the third quarter was 140 million yuan, an increase of 34.8% over the same period last year, an increase of 32.0% over the same period last year. The net profit returned to the mother was 29.12 million yuan, an increase of 44.1% over the same period last year, and an increase of 8.4% over the same period last year, which is in line with our expectations.
Trend of development
Downstream demand is released steadily, and income shows resilience. With the steady release of the demand for state secret transformation in pan-finance, government and other industries, the company's basic product identity security, communication security, data security and the accelerated growth of new track products cloud security and mobile security provide the company with core support; with the rise of scenarios such as overlaying digital RMB, car networking and RMB cross-border payment, we believe that downstream demand is expected to increase. At the same time, the company actively extends the product matrix to the flow products. We believe that the volume on the demand side and the further improvement of the company's product line are expected to drive the company's revenue to maintain rapid growth. At the gross margin level, the gross profit margin for the first three quarters is from + 2.2ppt to 73.1% to 73.1% from the same period last year. The gross profit margin for the third quarter is from + 2.9ppt to 71.8%, month-on-month-3.3ppt.
Single-quarter net profit increased compared with the same period last year. The net profit margin of homing in the first three quarters was 17.5%, down 1.7% from the same period last year, 20.7% in 3Q22, an increase in 1.3ppt compared with the same period last year, and a decrease in 4.5ppt compared with the previous year.
In the first three quarters, the company's sales / R & D / management expenses were-5.0%, 20.0%, 20.0% and 40.5%, respectively, and the sales / R & D / management expenses rate was 17.7%, 28.0%, 13.0%, respectively, year-on-year-4.8/+0.1/+1.8ppt. In the third quarter, the company's sales expenses / R & D expenses / management expenses compared with the same period last year-1.7%, 24.1%, 46.9%, + 16.4%, 17.9%, 24.5% respectively. In the first three quarters, the company had a net operating cash outflow of 86.23 million yuan, an increase of 94.0% over the same period last year, including annualized accounts receivable turnover days (332 days) and accounts payable annualized turnover days (295 days) compared with the same period last year. Inventory turnover days (393 days) + 37 days compared with the same period last year.
Profit forecast and valuation
Keep profit forecasts for 2022 and 2023 unchanged. The current share price corresponds to a price-to-earnings ratio of 38.6 times 2023 / 32.5 times 2023. Taking into account the pick-up in sentiment in the sector, and the release of demand for Guomi transformation to drive the company's fundamentals to continue to improve, to maintain outperforming industry ratings and raise the target price by 31.3% to 63 yuan, corresponding to 40.0 times 2023 price-to-earnings ratio, there is 22.6% upside compared to the current stock price.
Risk.
Downstream customer demand is not as expected; new product promotion is not as expected.