Key points of investment
The company released its 2022 annual report: revenue of 1,220 billion yuan in 2022, +0.78% year on year; net profit of 8.718,200 yuan, -80.71% year on year; net profit of non-return mother was 587,700 yuan, -98.58% year on year. Q4 achieved revenue of 340 million yuan in a single quarter, +10.91% year on year; net profit of the mother was 21.7306 million yuan, +410.52% year on year; net profit of the non-return mother was 157.758 million yuan, +1683.62% year on year.
Profits have bottomed out in Q4. Lean production is expected to drive future profitability improvements. The company achieved net profit of 8,718,200 yuan in 2022, with a net interest rate of 0.71%. Among them, Q4 achieved net profit of RMB 21.7306 million, +410.52% year on year, with a net interest rate of 6.39%, a year-on-year rate of +5.00pct.
The sharp drop in the price of silver, the main raw material, in the first three quarters of 2022 damaged the company's profitability. The price of silver increased significantly in the fourth quarter, driving the company's profitability to bottom out. In 2022, the company promoted the construction and trial operation of the SAP management system and actively carried out lean production. As the company continues to deepen lean management and digital transformation, it is expected to reduce costs and increase efficiency and increase profitability.
The release of new energy vehicles, electronics and other related products has accelerated, and the potential of the new track is clearly unleashed. Against the backdrop of a slowdown in the downstream growth rate of the traditional HVAC business, the company vigorously expanded new tracks such as new energy vehicles and electronics. In 2022, the company's new energy vehicles and electronic tracks achieved revenue of 0.47/128 million yuan respectively, +500.19%/+42.87 percent over the same period last year. As the company continues to increase orders from customers such as Hongfa Co., Ltd., a leading relay manufacturer and Meicheng Ceramics, an upstream supplier of ceramic seals for BYD power batteries, and the acceleration of the domestic substitution process of electronic solder paste, we are optimistic that the company's business potential will be released in new fields such as new energy vehicles and electronics, which is expected to drive the company's future performance to continue to grow rapidly.
Actively expanding overseas markets, overseas business began to contribute incremental revenue, and the company actively developed overseas markets. The business expanded to more than 40 countries and regions around the world, with sales revenue of 101 million yuan in overseas markets in 2022, +30.99% over the same period last year. In the future, the company will further expand overseas markets, explore market opportunities in North America and Europe while being deeply rooted in the Asia-Pacific market, and vigorously explore overseas customers in the refrigeration, power and electrical industries, and it is expected that the company's sales revenue will continue to increase in the future.
It is proposed to launch a raw material hedging business, which is expected to reduce the risk of fluctuations in raw material prices. Raw materials account for a large share of the company's product costs, and fluctuations in bulk raw material prices have an obvious impact on the company's profit level. According to the company announcement, the company plans to launch a hedging business for non-ferrous metals, copper and silver, with a contract value of no more than RMB 200 million. The development of the hedging business is expected to reduce the adverse effects of large fluctuations in raw material prices on the company's profitability and enhance the stability of profit levels.
Profit forecasting and valuation
The total revenue for 2023-2025 is estimated to be 1,609/20.86/2,663 billion yuan respectively. The corresponding growth rate is 31.88%/29.62%/27.65% respectively, and the net profit to the mother is 0.48/0.91/147 million respectively. The corresponding growth rate is 451.73%/88.85%/62.09% respectively, and the corresponding EPS is 0.54/1.02/1.66 yuan respectively. Maintain a “buy” rating.
Risk warning
Downstream demand for new businesses such as new energy vehicles and electronics fell short of expectations; overseas orders fell short of expectations; and there was a risk of fluctuations in raw material prices.