Elon released its report for the third quarter of 2022: In the first three quarters of 2022, the company achieved revenue of 1,432 million yuan, an increase of 18.08% over the previous year, achieved net profit of 136 million yuan, a decrease of 19.87% over the previous year, and achieved net profit of 127 million yuan after deduction, a decrease of 22.31% over the previous year.
Key points of investment
Shortages of materials and rising raw material costs continue to affect the company's performance
Due to the scarcity of the global component market, in order to meet customer delivery, the company purchased additional high-priced raw materials, causing the cost of raw materials to rise. At the same time, finished products could not be completed and sold due to inadequate materials. The company's revenue and net profit for the first three quarters of 2022 continued to be under pressure. Looking at a single quarter, 2022Q3 achieved revenue of 442 million yuan, a year-on-year decrease of 2.09%, and net profit of its mother was 43 million yuan, a year-on-year decrease of 30.67%. Looking at the downstream application industry, the company's revenue growth for medical electronics, automotive electronics and industrial control products is highly certain. In terms of profitability, the company achieved a gross profit margin of 24.40% in the first three quarters of 2022, a year-on-year decline of 4.53 pct, and a net sales interest rate of 9.83%, a year-on-year decline of 4.41 pct. In terms of expenses, the company's sales, management, finance, and R&D expenses rates in the first three quarters of 2022 were 1.42%, 4.70%, 0.13%, and 5.23% respectively, of which R&D expenses reached 74.912 million yuan, an increase of 29.11% over the previous year.
“Small batches and multiple varieties” are clearly positioned to give full play to the advantages of platform-based enterprises and refined management
Under the trend of specialized division of labor in the global electronics industry, the market capacity of the global EMS industry is gradually expanding. According to statistics from New Venture Research, the global EMS industry market reached 682.7 billion US dollars in 2021, an increase of 14.8% over the previous year. Among them, the EMS market in the Asia-Pacific region accounted for 71% of the global market share. It is expected that the global EMS industry market size will reach 94.65 billion US dollars by 2026, and the prospects for the industry are broad. The company is deeply involved in the EMS industry, based on differentiated market strategies, and targets industry segments with high quality requirements and diverse needs. 2022H1 maintains deep cooperative relationships with customers in various industry segments such as Stanley Platte, CommScope, Inspur, and Shanghai Lianying Film, and continues to develop new customers. Currently, the number of cooperative customers has exceeded 300. At the same time, the company continues to expand in the fields of automotive electronics and new energy power applications, laying the foundation for subsequent long-term development. The company actively promotes platform-based resource integration and continues to further improve processes in terms of management. The SAP-ERP system and SAPEWM system, which began to be remodeled in 2021, were officially switched and launched in July. The use of the new system will help the company reduce inventory and continuously improve management efficiency. In addition, the company is actively promoting market development and expanding the company's production capacity layout. The company plans to invest in 3 SMT production lines in Mexico, 1 of which has already been completed and entered the product mass production stage in 2022; it plans to invest in 4 SMT production lines in Vietnam, which is expected to be put into production by the end of November this year; the construction progress of the first phase of the company's second phase of the 50,000-square-meter plant continues to advance. After the total 170,000 square meters of the first and second stages are put into use, the output value corresponding to the total production capacity is expected to reach 10 billion yuan.
Profit forecasts
We believe that as a leading enterprise in flexible manufacturing, the company is deeply involved in the EMS market. In the context of the shift of the global electronics manufacturing service industry to China, the company is expected to achieve long-term growth through a “small batch, multi-variety” customized strategy and continuous exploration of high-quality customers. It is predicted that the company's revenue for 2022-2024 will be 2,047, 25.02 billion yuan, and 3,057 billion yuan respectively, and the EPS will be 1.25, 1.62, and 2.03 yuan respectively. The current stock price corresponding to PE is 21, 17, and 13 times, respectively, maintaining the “buy” investment rating.
Risk warning
The risk of declining industry sentiment, the risk of fluctuations in raw material prices, the risk of production capacity construction falling short of expectations, and the risk of increased competition in the industry.
