Income growth has accelerated and profitability has improved. The company's 3Q22 revenue was 5.37 billion yuan, a year-on-year increase of 26.5% and a month-on-month increase of 19.0%. The growth rate was relatively fast, mainly due to a sharp increase in revenue from the electromagnetic transmission and precision structural parts division, and 3Q was the traditional peak season for overseas customers. Acoustics / electromagnetic transmission and precision structures / pure optics / sensors and semiconductors recorded 23.2 billion yuan, respectively, accounting for 43%, 38%, 11%, 8%, respectively. Gross profit recorded 1.02 billion yuan, gross profit margin 19%, a year-on-year decline in 3.7pct, mainly due to the low capacity utilization of the optical division, the decline of lens ASP year-on-year and changes in the company's product structure.
During the period, the company continued to reduce costs and increase efficiency, with a net profit of 230 million, a year-on-year increase of 27.5%, a month-on-month increase of 61.4%, a net profit margin of 4.4%, and an improvement in 1.1pct.
Acoustics: vehicle acoustics mass production delivery, new growth curve formed. In the third quarter, overseas customers entered the traditional peak season, and the revenue of the company's acoustics division improved by 5.6% compared with the same period last year. 21.5% to 2.32 billion yuan. The gross profit is 620 million yuan and the gross profit margin is 26.9%, which is relatively stable. The company has made smooth progress in the field of vehicle acoustics, has begun mass production and delivery in the third quarter, and has successfully developed landmark new power designated projects. We expect that with the company's continuous acquisition of new designated projects and mass production and delivery of designated projects, the company's vehicle acoustics business is expected to grow rapidly next year and the long-term revenue contribution will be no less than that of the consumer electronics sector.
Electromagnetic transmission and precision structural components: all business lines go hand in hand, with good growth in the future. 3Q22, the company's electromagnetic transmission and precision structure business income of 2.05 billion yuan, a sharp increase of 47.3% / month-on-month increase of 43.6%, gross profit margin increased by 1.3pct to 21.5%.
1) in terms of electromagnetic transmission, the permeability of X-axis motors in the Android market is increasing, and the company has launched "Acoustics + Motor" Combo standardized products, which have advantages in performance, space, weight, cost and other aspects, and are expected to carry products in different fields in the future. 2) in terms of precision structural parts, through Dongyang Precision, the company has further penetrated into the precision structural parts business of overseas customers, and successfully obtained the new machine business of metal frames. At the same time, the notebook business has been developed smoothly. We expect that as the company continues to expand its laptop market share and new projects continue to advance, Dongyang Precision is expected to bring higher revenue contribution in 2023 and further improve the profitability of the division.
MEMS is expected to expand new applications and optics will move towards VR. 1) in the sensor and semiconductor division, the revenue of 3Q22 recorded 420 million yuan, a substantial increase of 66.1% and 74.7% compared with the same period last year. During the period, Malaysia's high-performance MEMS microphone intelligent manufacturing base has been put into production, and is expected to continue to expand to IoT, notebook, smart home, car and other non-mobile phone markets. 2) in the optical division, due to factors such as weak market demand, shipments of plastic lenses decreased by 24.9% month-on-month, dragging down the revenue of 3Q22 optical division by 39.0% to 570 million. During the period, the company continued to make breakthroughs in new optical products. In terms of WLG lenses, the company has successfully developed a new 3P VRPancake optical machine module, which is expected to build a production line this year; the glass-plastic hybrid products in the look and cabin have passed the head manufacturer certification.
In terms of plastic lenses, 7p plastic lenses are expected to be shipped this year. With the optimization of the product portfolio, the plastic lens ASP is expected to improve month-on-month and further enhance the profitability of the optical division.
Investment advice: we expect the company's income from 2022 to 2024 to be 209.1%, 23.27 billion yuan, respectively, an increase of 18.3%, 11.3%, 8.6%, and the net profit from home is 8.7%, 1.44 billion yuan, respectively, with a year-on-year growth rate of-34.1%, 42.8%, 20.5%. Vehicle acoustics, motors, structural components, MEMS and other businesses have good growth, and have great potential to generate income in the future. Based on profit growth forecasts of 42.8 per cent and 20.5 per cent the year after next, we raise the company's target price to HK $22, corresponding to 20 times 2023 PE, maintaining a "buy" rating.
Risk Tip: the risk of lens prices returning to less than expected, the risk of a continued downturn in the mobile phone market, and the risk that the progress of new product research and development or mass production is not as expected.