The 2022 results fell slightly short of our expectations
The company announced its annual results: 2022 revenue of 2,203 billion yuan, +55.4% year on year; net profit of the mother was 154 million yuan, +66.8% year on year. Q4 Single quarter revenue was 576 million yuan, +31.8%/-11.5% year-on-month; net profit of the mother was 34.94 million yuan, -6.6%/-16.5% compared with the previous quarter; net profit of the non-return mother was 30.52 million yuan, -18.3%/-25.8% year-on-month. The performance fell slightly short of our and market expectations, mainly because 4Q22 revenue fell short of expectations, while taking credit impairment losses and significant increases in R&D expenses over the same period last month.
Development trends
The proportion of self-developed ICs has increased dramatically. Distribution revenue in 2022 was 1,968 billion yuan, +47.4% year on year; self-developed IC revenue was 221 million yuan, +206.9% year on year, mainly due to batch loading of products by mainstream car companies. Looking at the structure, distribution and self-developed ICs accounted for 89% and 10% respectively in 2022, and the share of self-developed ICs increased by 5 ppt over the same period last year. We believe that as HVAC driver ICs, LED driver ICs and other products continue to be released, the share of self-developed ICs will continue to rise. Looking ahead to 2023, we believe that the overall demand for automotive electronics will not decrease. The company is expected to continue to develop new customers and markets to achieve rapid revenue growth.
The business structure was optimized, and gross margin increased significantly over the same period last year. The gross profit margin in 2022 was 20.43%, +2.29ppt year on year, mainly due to: 1) the company optimized the distribution product structure, higher gross margin products grew faster, and gross margin increased 1.04ppt to 17.86% year-on-year; 2) Benefiting from scale effects and product price increases, the gross margin of self-developed ICs increased 3.45ppt to 42.68% year-on-year, and turned a loss into a profit compared to achieving net profit in 2021, with a net margin of 16.3%; 3) The share of revenue of high-margin self-developed ICs increased.
4Q22 revenue declined month-on-month, and rapid increase in expenses further affected profits. Affected by the December epidemic, 4Q22 revenue fell 11.5% month-on-month to 576 million yuan, of which distribution revenue fell 16.3% month-on-month.
Sales/R&D expenses were $0.31/017 million, +46.5%/+33.6% month-on-month, mainly due to personnel expansion and amortization of intangible assets; the sales/R&D expenses ratio was 5.3%/2.9%, +2.1ppt/0.9ppt compared to the previous month.
Continued investment, focusing on analog IC research and development. The company announced on October 12, 2022, that it intends to issue 400 million yuan of convertible bonds for the construction of automotive analog chips and automotive electronics headquarters, which will help the company continue to develop in the automotive electronics field. At the same time, the company continued to expand its R&D personnel. By the end of 2022, the number of the company's R&D personnel had increased 79% year-on-year, accounting for an increase of 1ppt to 24.9%.
Profit forecasting and valuation
Considering sales and price pressure brought about by the easing of tight supply and increased competition, we lowered our 23 revenue by 8.3% to 2.9 billion yuan, and net profit attributable to the parent by 15.9% to 248 million yuan. For the first time, we introduced a profit forecast for '24. The revenue/net profit attributable to the mother was 3.8 billion yuan/410 million yuan respectively, +30%/+65% over the same period last year.
The current stock price corresponds to 23/24 P/E 21 times/13 times. We maintained an outperforming industry rating. Due to declining performance expectations, the target price was lowered by 22.2% to 78.8 yuan, corresponding to the P/E of 23/24 25 times/15 times, an increase of 21% over the current stock price.
risks
Demand for automotive electronics fell short of expectations; introduction of new self-developed IC products fell short of expectations; market competition intensified.