Incidents:
On April 10, 2023, Weishi Electronics released its 2022 annual report. Revenue for 2022 was 1,359 million yuan, an increase of 13.18% over the previous year; net profit attributable to shareholders of listed companies was about 96.14 million yuan, an increase of 83.49% over the previous year; basic earnings per share were 0.45 yuan, an increase of 84.36% over the previous year.
Comment:
The company's performance was in line with our previous expectations, and gross margin increased markedly. Revenue in 2022 was 1,359 million yuan, an increase of 13.18% over the previous year; net profit attributable to shareholders of listed companies was about 96.14 million yuan, an increase of 83.49% over the previous year; gross sales margin was 18.35%, an increase of 1.64 pct over the previous year. By product, revenue from the backlight display module business was 1,057 million yuan, up 13.85% year on year, product gross margin was 17.73%, up 1.52 pct year on year; LCD module business revenue was 907.001 million yuan, up 26.90% year on year, and product gross margin was 11.99%, up 10.68 pct year on year. Revenue growth mainly benefits from the continuous development of new and old customers: on the one hand, the company is deeply involved in existing customers, and on the other hand, it continues to step up efforts to develop new high-quality strategic customers, adding new first-class supplier customers such as AUO, Xingyu, and Jiangcheng. Through internal efficiency improvements, the company increased its market development efforts. At the same time, benefiting from the recovery of the industry, gross margin increased markedly.
The company obtained orders from leading new energy companies T and BYD, placed orders for Mini LED backlight products, and introduced mass production of VR products. The company has accelerated its development efforts for new energy customers. In addition to company T, a terminal customer that has already developed, it has obtained new orders for BYD backlight modules from leading domestic NEV car companies. The company obtained seven fixed orders for the new Mini LED backlight products and gradually introduced mass production in 2023. Within its life cycle, it could reach several billion yuan according to customer forecasts. The company's fixed orders for VR products will also be put into mass production in 2023. In the game console industry, the company will enter mass production in 2023 on the basis of receiving fixed orders from world-famous game console customers.
The company increased its reserves for emerging business projects such as duplex screens and curved screens, and R&D investment increased 24.15% year-on-year in 2022. The company actively follows the development trends of intelligent, lightweight, and electrified automobiles, and uses its core technical reserves and product development advantages to increase project reserves. The company is currently continuing to test large-scale vehicle backlight display modules with curved surfaces such as 36.5 inches, 48 inches and 55.8 inches as preparatory mass-produced models. The company has received mass production projects for 12.3+12.3 inch duplex screens and 12.3+27 inch duplex screens from customers. The company developed a local dimming (LOCAL-DIMMING) backlight display module and introduced a fully automatic blue mini LED solid crystal line. At the same time, the company proactively developed key OLED 3D curved surface lamination technology and introduced 3D full lamination wire in March 2022. In 2022, the company invested a total of 1019.661 million yuan in R&D, an increase of 24.15% over the previous year.
Investment advice: The company is a leading automotive backlight module company, benefiting from the dual drive of Mini LED and VR.
The net profit attributable to the company in 2023-2025 is estimated to be 179 million yuan, 290 million yuan and 391 million yuan respectively. Corresponding to the current stock price PE is 17X, 11X and 8X respectively, maintaining the “recommended” rating.
Risk warning: (1) Downstream automobile and other industries are declining; (2) the introduction of Mini LED products fell short of expectations; (3) industry competition intensified.