The company's revenue in 2022 was 4.125 billion yuan, about +35% year on year; net profit of the mother was 96 million yuan, +220% year on year; after deducting non-net profit, 0.08 million yuan, 106% year on year. The company actively develops new products related to new energy, and provides integrated thermal management, electromagnetic shielding and lightweight solutions for new energy vehicles, photovoltaics and energy storage. Benefiting from the rapid development of the new energy industry and the restoration of profitability brought about by the company's increased capacity utilization rate, the company's performance is expected to experience significant growth. Maintain the “buy” rating and continue recommending.
Incidents: The company announced its 2022 annual report, with revenue of 4.125 billion yuan, about +35% year on year; net profit of the mother was 96 million yuan, +220% year on year; after deducting non-net profit of 0.08 million yuan, +106% year on year. The comments on this are as follows:
22Q4 profitability reached a record high in a single quarter of the year. Revenue/net profit attributable to mother/net profit after deducting non-net profit for 2022 was 4.125 million/196 million/0.08 billion yuan respectively. The net interest rate for the year was 2.3%, and net interest rate after deducting non-net interest was 0.2%. Revenue/net profit attributable to the mother and net profit after deducting non-net profit for the fourth quarter were 1,327 million/995 million/45 million yuan respectively. The net interest rate was 7.16%, and the net interest rate after deducting non-net interest was 3.39%, which is still a significant increase from 2.88% (net net interest rate after deducting non-net interest rate) in the third quarter. By business, revenue from the new energy sector increased rapidly, and revenue from the communications sector increased 30%, but gross margin was lower due to some orders.
The rapid growth of the automobile+energy storage+photovoltaic industry helped the company take off for the second time. New energy vehicles, photovoltaics, energy storage and other industries all place extremely high demands on electromagnetic shielding materials, thermal management materials, and lightweight components. The company has increased various investments and accumulated customers such as Ningde Shidai, Guangzhou Automobile Group, and Sunshine Power in the fields of new energy vehicles and energy storage. In 2022, the new energy business accounted for 29% of revenue, and achieved mass production and delivery of core products such as liquid cold plates, composite (HP-RTM lightweight materials) covers, connectors, integrated die-castings, and thermal conductive adhesives. In the future, with the rapid development of the new energy industry, the company is expected to achieve rapid growth in the new energy sector.
The gross margin inflection point has been reached, and profitability is expected to gradually pick up. The company has invested heavily in the past two years. Combined with demand in the communications and consumer electronics sectors falling short of expectations, the company's profitability has declined. In 2022, with the gradual mass production of products in the new energy industry, the company's capacity utilization rate increased, which led to a month-on-month improvement in gross margin. The gross margins of 2022Q1-4 were 11.91%, 13.76%, 17.66%, and 22.70%, respectively. In the future, as the product structure continues to be adjusted and the scale of revenue increases, the company's expense ratio is expected to decline, and the overall profit level may gradually rise.
Reduce costs and increase efficiency, and focus on core business. The company strengthened internal management efficiency, actively invested in research and development of new processes and technologies, strengthened the construction of automated product lines, reduced costs and increased efficiency, and overall profitability was greatly improved. Furthermore, in order to further optimize the company's asset structure, quickly return capital, and promote the company's healthy and sustainable development, the company decided to sell 28.882% of the shares of Guangdong Bowei, a holding subsidiary, and received 28.88 million yuan in equity transfer funds from this transaction before December 31, 2022.
Risk factors: Risk of declining gross margin due to increased market competition; growth in the new energy industry falls short of expectations; price fluctuations of major raw materials; loss of technology and loss of core technical personnel; management risks brought about by continuous expansion of business scale.
Profit forecasting, valuation and ratings: Considering the company's strong revenue growth and the 2022-Q4 profit margin exceeding expectations, we believe that profitability is expected to continue to improve. The 2023/24 revenue forecast was raised to 5.30 billion/6.49 billion yuan (the original forecast was 5.076 billion/6.409 billion yuan respectively), and the net profit forecast of Guimo reached 256 million/456 million yuan respectively (the original forecast was 207 million/415 million yuan), and the revenue forecast for 2025 was added to 7.75 billion yuan and 614 million yuan respectively 100 million yuan. Considering that comparable companies (Zhongshi Technology, Changying Precision, Anjie Technology, Quanfeng Motor, Wencan Co., Ltd., and Xusheng Co., Ltd.), the 2024 wind forecast was 13 times PE and the company's rapid growth, giving 22 times PE in 2024, corresponding to the target price of 20 yuan, maintaining the “buy” rating, and continue to recommend.