3Q22 performance is lower than we expected.
The company announced 1-3Q22 results: revenue was 6.613 billion yuan, an increase of 105.5% over the same period last year, and net profit was 353 million yuan, up 109.7% over the same period last year. In a single quarter, 3Q22 revenue was 1.989 billion yuan, an increase of 34.2% over the same period last year, and net profit was 89 million yuan, an increase of 36.8% over the same period last year. The performance was lower than expected, mainly due to delays in customer delivery.
Gross profit margin fell slightly and cost control was strengthened. 3Q22's comprehensive gross profit margin was 19.9%, down 0.8% from the same period last year. During the period of 3Q22, the expense rate decreased, of which the sales, management and R & D expense rate decreased 1.0/0.4/1.0ppt compared with the same period last year, while the financial expense rate increased 1.9ppt. 3Q22's net interest rate rose slightly to 4.5 per cent year-on-year.
Orders on hand remain high. We estimate that the company's newly signed orders increased year-on-year in the first three quarters. By the end of the 3Q22 period, the company's inventory balance was 3.063 billion yuan, an increase of 532 million yuan over the same period last year. The company's contract debt balance was 971 million yuan, an increase of 39 million yuan over the same period last year.
Trend of development
The downstream of the power battery remains prosperous. Sales of new energy vehicles and power battery installations doubled in the first three quarters of 2022. In addition to the Ningde era, China New Airlines, Yiwei LiNeng, Xinwanda and other second-and third-line battery factories accelerate production expansion, driving the growth of industry demand. We estimate that the expansion of power batteries in 2022 will increase by about 50-60% compared with the same period last year, and the industry will remain prosperous in the short term.
The expansion of overseas markets is accelerating, and the scale of stacking machines is up. In 2022, the company won ACC orders from Volkswagen in Germany and France, and overseas business expansion accelerated, mainly due to the company's ability to deliver various types of business equipment, which was recognized by new entrants of power batteries in Europe. In 2022, BYD, Volkswagen, Honeycomb and other enterprises mainly adopted lamination scheme, which led to the rapid upward demand for stacking machines in the industry.
Profit forecast and valuation
Taking into account the decline in gross profit margin and the increase in asset impairment, we cut 2022, 2023, 10%, 20%, and 14%, to 0.78, 1.21. The company's current share price corresponds to 2022 25.4x/16.5x 2023. Taking into account the decline in earnings and the slowdown in industry growth, we have lowered our target price by 20% to 23.00 yuan, corresponding to 2022 / 2023 29x/19x Pamp E, which has 16% upside space and maintains a neutral rating.
Risk.
Downstream bidding is not as expected; equipment delivery is not as expected.