1Q23 performance is in line with our expectations
The company announced 1Q23 results: the company's income was 1.106 billion yuan,-11.9% compared with the same period last year; the net profit returned to the mother was 65.979 million yuan, + 9.8% compared with the same period last year; and the net profit was 54.821 million yuan,-14.4% from the same period last year.
The company's 1Q23 revenue was slightly lower than we expected and its profit was in line with our expectations, mainly due to the relaxation of 1Q22 shipping capacity and the company's high revenue base caused by concentrated shipments in the same period last year.
The high base affects income under some pressure. 1) General lighting business: the company's general lighting business is mainly export ODM. 82% of export revenue in 2022 has been affected by destocking in overseas markets since 2H22, overseas customer order demand has declined, superimposed 1Q22 shipping mitigation led to a high base of revenue, so the overall revenue of 1Q23 company is under pressure, but gradually improved compared with 4Q22. We believe that with the promotion of overseas destocking, the company's revenue growth is more certain with a low base of revenue in the second three quarters of 2022. 2) on-board business: the company's on-board business is mainly LDM and BMS. 1Q23 received Marelli's LDM designated project and successfully entered the global headlight head enterprise supply chain, and the company is expected to start bulk supply in 2Q23. The company is currently working on a project worth more than 3 billion yuan, and we estimate that the existing orders for the company's 1Q23 vehicle business are still making steady progress.
Profitability repairs continue to materialize. 1) 1Q23's gross profit margin is from + 2.9ppt to 18.8% compared with the same period last year, and the downward cost of raw materials drives the company's profitability to repair continuously. 2) the 1Q23 sales expense rate, management expense rate and R & D expense rate are 3.8%, 3.8%, 3.3%, and + 1.0/+0.1/+0.5ppt, respectively, compared with the same period last year. Due to the decline in income and exchange rate fluctuations, the overall expense rate has increased. The increase in sales expense rate is mainly due to the company 1Q23's efforts to expand overseas customers. Overall, 1Q23's parent net interest rate is 6.0%, year-on-year + 1.2ppt. 3) the net inflow of operating cash of 1Q23 Company is 74.88 million yuan, which matches the net profit, and the operation quality is high.
Trend of development
In terms of general lighting business, according to the data of the General Administration of Customs, the export value of 3Q22/4Q22/1Q23 domestic lamps, lighting fixtures and parts is respectively-10.5%, 15.8%, 1.7% (USD caliber), 1Q23 industry exports have a marginal improvement trend, we expect that as overseas customers destocking gradually enter the end, the company as a general lighting export leader, overseas business growth is expected to gradually recover. In terms of vehicle business, the company's manufacturing capacity is prominent, has passed SAIC, XPeng Inc. and other automobile zero system audit, and is constantly increasing vehicle R & D investment, we expect that the future customer and order expansion is expected.
Profit forecast and valuation
Basically keep the profit forecasts for 2023 and 2024 unchanged. The current share price corresponds to a price-to-earnings ratio of 19.1 times 2024 / 15.6 times earnings. To maintain the outperform industry rating, taking into account the recent decline in sector valuations, we cut our target price by 9% to 20.00 yuan, corresponding to 25.7 times 2023 price-to-earnings ratio and 21.0 times 2024 price-to-earnings ratio, which has 35% upside compared to the current stock price.
Risk
Raw material price fluctuation risk; exchange rate fluctuation risk; vehicle business development is not as expected.