Performance review
The 2022 results fell short of our expectations
The company announced its 2022 results: revenue in 2022 was 14.961 billion yuan, -8.4% year on year; net profit of the mother was 1,210 billion yuan, or -39.3% year on year. The company's performance in 2022 fell short of our expectations, mainly due to increased R&D investment and cost increases exceeding expectations.
Development trends
The information industry awaits a recovery in downstream demand. 1) Consumer Electronics: Revenue in 2022 was 2,050 billion yuan, -30% year on year, mainly due to low downstream demand and low customer innovation. Looking ahead, if we can achieve growth that exceeds expectations, we need to further observe the product innovation efforts of major consumer electronics customers and the expansion of overseas production capacity; 2) PCB equipment: revenue of 2,786 billion yuan in 2022, -32% over the same period last year, mainly due to delays in orders due to the slowdown in downstream customers' capital expenditure plans; looking at the revenue breakdown structure, the share of drilling machines with a higher gross margin increased by -15ppt to 60% year on year to 15%. Looking ahead, we think that in addition to the recovery in industry demand, we need to further observe the company's progress in upgrading to high-end HDI and IC carrier board products.
General equipment follows macroeconomic fluctuations, and new energy applications are being deployed. In 2022, the company's general laser processing equipment revenue was 5.268 billion yuan, which was basically the same as the previous year; of these, only the high-power laser welding business achieved positive growth (revenue of 560 million yuan), mainly benefiting from increased demand for NEV processing. Looking ahead, we think that, benefiting from the gradual recovery of the manufacturing industry, high-power cutting equipment may resume growth, while high-power welding is expected to maintain rapid growth with customer breakthroughs and full on-hand orders in the NEV sector.
Investment in R&D increased, and new energy and semiconductor equipment became the main driving force for growth. 1) Lithium battery equipment: revenue of 2,536 million yuan, +28% year on year. Looking ahead, we think that the revenue of lithium battery equipment is expected to continue to grow rapidly, with higher gross profit volume of new products, increased labor efficiency, profit margins or room for improvement; 2) Photovoltaic equipment: revenue of 228 million yuan, +70% year on year. Looking ahead, with the company's order breakthrough in TopCon and other fields, which is expected to continue to grow rapidly; 3) Semiconductor equipment: revenue of 2,094 billion yuan, compared to +8% year on year, mainly due to LED in 2022 downstream Demand is low. Looking ahead, we think the company may benefit from domestic substitution of semiconductor equipment and expansion of new categories, and is expected to maintain rapid growth. Overall, the company's R&D expenditure rate in 2022 was +2.2ppt to 10.7% year-on-year. Continued investment in emerging fields such as new energy and semiconductors is expected to enhance its competitive strength.
Profit forecasting and valuation
Taking into account changes in product structure and increased R&D investment, we lowered net profit in 2023 by 7.9% to 1,709 million yuan, and introduced 2024 net profit of 2,214 billion yuan. The current stock price corresponds to the price-earnings ratio of 18.7 times/14.4 times 2024 in 2023/2024. Maintaining an outperforming industry rating and a target price of 33.20 yuan corresponds to a price-earnings ratio of 20.4 times in 2023. There is room for an increase of 9.4% compared to the current stock price.
risks
Downstream demand fell short of expectations; expansion of the new energy sector fell short of expectations; PCB boom fell short of expectations.