Incident: The company released its 2022 annual report. It achieved operating income of 3,019 billion yuan in '22, +10.67% year on year, and net profit of the mother was 110 million yuan, +62.77% year on year.
Comment:
Revenue growth was steady throughout the year. The company achieved revenue of 3,019 billion yuan in 2022, +10.67% year on year, and net profit of the mother was 110 million yuan, +62.77% year on year. 22Q4 achieved operating income of 763 million yuan, -10.79% year on year, net profit of 793 million yuan, year-on-year of -1273.5%; 22Q4 gross profit margin was 1.26%, -8.35 pct year on year; net sales margin was -104.07%, -97.31pct year on year.
The total of the three fees was 18.77%, +6.19pct compared to the previous year. Among them, the sales/management/R&D expenses ratio was 2.96%/11.40%/4.23%, respectively, and -0.28pct/+4.85pct/+1.84pct over the previous year. The increase in the fee rate is mainly due to the inclusion of 70 million yuan in the company's first equity incentive settlement in '22 as three fees.
Focus on divestment of loss-making business from the main business, and withholding non-caliber performance is under pressure in the short term. The company further divested its new energy and aftermarket business. Jingu Environmental Protection Equipment Company completed the transfer of control in March 2022. One of the aftermarket businesses, Xinkangzhong, changed the equity method to financial asset accounting, and the second fixed asset of Auto Superman in the aftermarket was calculated for significant impairment. The pressure on the 22Q4 company's non-standard deduction performance was mainly due to the above divestment actions, which led to impairment preparations for non-current financial assets of 170 million yuan, credit impairment losses of 320 million yuan, asset impairment losses of 50 million yuan, asset disposal losses of 40 million yuan; Xinkangzhong's losses, employee equity incentives included in current expenses, etc. We believe that with the company's subsequent launch of lightweight equipment, focusing on the main wheel business and making full use of Avatar's technological advantages, profit levels are expected to continue to rise.
The business-to-passenger customer structure is optimized, and the scope of support is broadened to open up room for growth. The company sold about 1 million Avatar wheels in '22. Basically, commercial vehicle customers were mainly commercial vehicle customers. The main customers were Fukuda Daimler Oman, BAIC Heavy Trucks, SAIC Hongyan, and BYD New Energy Light Trucks. In 22H2, the company began supplying passenger car customers. In '23, it was confirmed that on-hand orders included Chery, Zero Run, Changan Yidong, etc. We believe that with the fulfillment of the company's orders and the expansion of the customer structure from a single commercial vehicle to passenger cars, Avatar shipments are expected to increase at an accelerated pace, and medium- to long-term growth space is expected to open up.
Production capacity expansion is accelerating to support performance growth. In terms of production capacity, by the end of '22, the company had 2 Avatar low-carbon wheel production lines, with a production capacity of 2 million. It is actively planning to expand production capacity: as of '22, there were 2 Fuyang Changkou production lines, with a total production capacity of 2 million units; 1 production line in Nanning and 2 new production lines in Hefei were added in '23. It is expected that construction will be completed and then put into operation in mid-'23. The company's overall production capacity plan is expected to reach an annual production capacity of 5 million Avatar and 10 million avatars in 23 and 24, respectively, corresponding to sales targets of 3 million units in 23 years, 5 to 6 million units in 24, and 12 to 20 million units in 25.
Profit forecast: As the world's leading automobile wheel manufacturer, the company is expected to continue to benefit from the increased performance brought about by the Avatar series products. Along with the results brought about by the divestment of the automotive aftermarket business, the company's performance is expected to rise at an inflection point. We expect the company's net profit to the mother in 2023-2025 to be 195, 305, and 450 million yuan, corresponding to PE 35, 22, and 15 times, respectively.
Risk factors: Fluctuations in raw material prices, production capacity release falls short of expectations, and customer development falls short of expectations.