Brief performance review
On April 18, 2023, the company disclosed its 2022 annual report and 2023 quarterly report. It achieved revenue of 4,097 million yuan in 2022, an increase of 36.2%; it achieved net profit of 275 million yuan, an increase of 50.8%. 4Q22 achieved revenue of 1,197 million yuan, an increase of 36.60%; net profit of the mother was 113 million yuan, an increase of 496%. 1Q23 achieved revenue of 1,013 million yuan, an increase of 41.93%; net profit returned to the mother was 95 million yuan, an increase of 3016% over the previous year.
Management analysis
Continuously adjust the organizational structure and optimize inventory projects. In 2022, the company adjusted its structure and management team, and various business units sorted out and optimized the internal organizational structure. For example, the industrial control business achieved unified management of domestic and overseas sales, multiple product lines collaborated to break down operating barriers; subsidiaries drove the company to increase capital and expand shares and optimize the shareholder structure in May; and increased the capital of photovoltaic technology subsidiaries in August. On the investment side, optimize stock projects and clean up bad and inefficient assets.
The basic market business grew steadily, with the inverter and UPS leaders: the industrial control and network energy businesses achieved revenue of 2,797/729 million yuan respectively in 2022, an increase of 11.82%/28.84%; gross margin was 35.95%/31.49%, respectively, with the same increase of -5.08pct/0.87pct. The overall market performance of industrial control OEMs declined, but battery manufacturing and photovoltaic equipment in the industry segment grew markedly. At the same time, the growth rate of project markets such as mining, chemicals, and electricity was higher than the OEM market. The company seized the opportunities of industry changes to drive the localization process. In '22, the share of low-voltage inverters rose to 5%, domestic investment came second, and modular UPS remained second in domestic investment for seven consecutive years.
The optical storage business is actively developing overseas markets, and the new energy vehicle business promotes integrated products: in 2022, the NEV and optical storage businesses achieved revenue of 607/271 million yuan respectively, a sharp increase of 206% and 116% over the previous year; gross margins were 23.04% and 17.43% respectively, with increases of 3.29pct and 19.08pct respectively. In the field of optical storage, the company launched new XG and XD series products, and photovoltaic, energy storage and off-grid products already have the ability to participate in international competition and are widely used in Europe, Australia, the Middle East and Southeast Asia. In terms of new energy vehicles, promoting integrated product development, gradually expanding from a single product to drive and high-pressure box assemblies, passenger vehicle projects have already received batch orders.
Continuing the business growth trend in the first quarter, profit growth was impressive. While the company's main business grew steadily and the layout of emerging businesses accelerated, Q1 gross margin increased 2.61 pct year on year due to positive effects of scale effects, raw material prices, etc., and net profit of the mother increased 3016% year on year.
Profit Forecasts, Valuations, and Ratings
We expect the company to achieve net profit of 351 million, 463 and 573 million yuan respectively in 2023-2025, corresponding to EPS 0.44 /0.58/0.72 yuan. The current price of the company's stock corresponds to a three-year PE of 28/21/17 times, maintaining the “buy” rating.
Risk warning
Prices of raw materials fluctuated; new energy vehicles fell short of expectations; the increase in industrial control market share fell short of expectations.