Event: 3Q22 achieved revenue of 5.373 billion yuan, up 26.5% / 15.0% year-on-year / month-on-month. The month-on-month increase was mainly due to the increase in the income contribution of A customers entering the traditional peak season, superimposed electromagnetic drives and precision structural parts. In terms of profitability, the gross profit of 3Q22 is 1.022 billion yuan, corresponding to a gross profit margin of 19.0%, a year-on-year decline in 3.7pct and a month-on-month increase in 0.7pct, mainly due to a decline in gross profit margin in optical and MEMS microphone business. The net interest rate of homing is 4.4%, which is nearly flat compared with the same period last year, and the month-on-month increase in 1.1pct is mainly due to: 1) the decline in OPEX rates; 2) the impact of exchange earnings, the corresponding net profit is 234 million yuan, up 27.5% from the same period last year and 61.4% from the previous year, which is in line with our expectations.
A customer has entered the peak season of new machine delivery, and Android Acoustics is under pressure: the revenue of 3Q22 Acoustics business is RMB 2.324 billion, up 5.6% and 21.7% year-on-year / month-on-month. The month-on-month increase is mainly due to customer An entering the peak season of new machine delivery. The gross profit margin was 26.9%, up 0.5pct from the previous month and down 0.8pct from the same period last year, which remained basically stable. Looking forward to 4Q22Pol A customers are expected to continue strong performance, Android Acoustics will continue to be under pressure. From the point of view of profitability, 1) the overall downregulation of Android Acoustics leads to low ASP pressure and low utilization of superimposed capacity, which is a drag on Android Acoustics profitability; 2) A customer gross profit margin is expected to remain stable.
In 23 years, the new machine motor of customer An is expected to be upgraded; Dongyang precision watch plus Android key customer demand strongly drives the growth of structure business income: 3Q22 electromagnetic transmission and precision structure income of 2.055 billion yuan, year-on-year / month-on-month increase of 43.6%, the year-on-year increase is mainly due to Dongyang precision watch, month-on-month increase mainly due to: 1) A customer motor business has entered the peak season of new machine pulling. 2) strong demand from Android key customers for structural parts. Gross profit margin is 21.5%, year-on-year / month-on-month increase 1.3pct/0.4pct. The motor business is mainly contributed by customers A, and the new motors of customer An in 23 years are expected to be upgraded. It is expected that two new motors will be added to the single machine to simulate side virtual key tactile feedback, which will increase the value of stand-alone motors. Android horizontal linear motors are gradually adopted for flagship machines and begin to infiltrate into the middle and low end, and their contribution to the overall growth of motor business is expected to increase year by year. In terms of structural components, through the acquisition of Dongyang Precision into A customer non-mobile metal structure business, superimposed strong demand from Android customers, the overall income and profitability of the structure business in 22 years are expected to be greatly improved.
Weak downstream demand and continued competition in the industry, optical business profitability continues to be under pressure: 3Q22 optical business revenue of 567 million yuan, up 45.1% year-on-year, down 39.0%; gross profit recorded a loss, mainly due to:
1) the demand for Android phones is weak, and the utilization rate of plastic lens capacity is low; 2) the price competition in the plastic lens industry continues; 3) affected by the appreciation of the US dollar, the purchase price of mobile phone camera module chips increases, resulting in a decline in profitability.
Looking ahead to 4Q22, ASP, a mid-and low-end plastic lens product, has limited downside space, and the ASP month-on-month decline is expected to narrow, but in view of: 1) continued weak demand for Android phones, and 2) pressure on the company's own plastic lens inventory, the optical business may continue to record a loss.
The vehicle acoustics business has entered the project harvest period, and it is expected to build a secondary growth curve for a long time: the vehicle acoustics business is progressing smoothly and 3Q22 begins mass production and delivery. Designated projects include different types of acoustic solutions, local speakers and tuning projects, covering many types of customers, such as traditional car companies, new car-building forces and overseas mid-and high-end car brands, which are expected to build a secondary growth curve in the long run.
Earnings forecast, valuation and rating: 3Q22 performance is in line with expectations and maintains 22-year net profit forecast; considering that major customer motors are expected to upgrade from 23 years onwards, the 23 / 24 net profit forecast is raised by 8% 19% to 10.72 / 1.416 billion yuan respectively; the company's current stock price corresponds to 22 / 23 net profit forecast 24x/18xP/E, in view of: 1) the upgrading of major customer motors has increased net profit since 23 years. 2) the vehicle acoustics business has entered the project harvest period, which is expected to open the valuation space and maintain the "overweight" rating.
Risk hint: a customer motor upgrade trend is suspended; optical profitability improvement is not as expected.