Incident: The company released its 2022 annual report on April 25, with annual revenue of 80 billion yuan, YoY +93.6%; Guimu's net profit of 60 million yuan, YoY +195.9%; after deducting non-net profit of 4.7 billion yuan, YoY +149.2%. At the same time, the first quarterly report of 2023 was released. 1Q23's revenue was 210 million yuan, YoY +19.6%; net profit of the mother was 150 million yuan, YoY +63.7%; after deducting non-net profit of 140 million yuan, YoY +58.8%. The performance is in line with market expectations.
4Q22 performance increased 389%; performance reached a record high in a single quarter. 1) In 4Q22, the company's revenue was 278 million yuan, YoY +149.7%; net profit of the mother was 275 million yuan, YoY +389.4%; after deducting non-net profit of 177 million yuan, YoY +225.7%. Both revenue and net profit of the mother reached record highs in a single quarter. 2) In 4Q22, gross margin increased 5.5 ppt to 78.2% year on year; net interest rate increased 48.5 ppt to 99.0% year on year. In 2022, gross margin fell 1.5ppt to 75.6% year on year; net interest rate increased 25.8ppt to 74.7% year on year.
In 1Q23, gross margin increased 10.2 ppt to 79.4% year over year; net interest rate increased 19.4 ppt to 71.8% year over year.
Production capacity of the kiloton line has been greatly increased; downstream demand continues to be booming. By product, 2022:1) Carbon fiber: revenue was 6200 million yuan, YoY +94.6%, accounting for 78% of total revenue; gross margin fell 0.7ppt to 76.1% year on year; 2) Carbon fiber fabric: revenue of 160 million yuan, YoY +78.1%, accounting for 21% of total revenue, and gross margin fell 2.9ppt to 76.5% year on year. In 2022, the company produced 311.8 tons of carbon fiber and fabric, YoY +113.7%. The increase in production was mainly due to the participation of a thousand ton line in production throughout the year; sales volume was 299.1 tons, YoY +91.7%. The increase in sales was mainly due to increased customer demand. By the end of 2022, the carbon fiber and fabric contracts signed by the company and customer A: 1) Contract 1: total amount of 640 million yuan, all fulfilled, confirmed revenue of 250 million yuan in 2022, and confirmed revenue of 560 million yuan; 2) contract 2: total amount of 2.17 billion yuan, pending implementation amount of 1.72 billion yuan, confirmed revenue of 400 million yuan in 2022, and confirmed revenue of 400 million yuan.
The management fee rate decreased by 11 ppt year over year; the inventory turnover rate accelerated. The cost rate for the period decreased by 16.4 ppt to 9.9% year on year: 1) the sales expense rate decreased by 0.1 ppt to 0.7% year on year; 2) the management expense rate decreased by 10.9 ppt to 4.0% year on year, mainly due to the fact that upfront fixed asset depreciation and labor costs were included in production costs after production was put into operation in 2022; 3) the R&D expense rate decreased 4.1ppt to 6.7% year on year, and R&D expenses increased 20.3% to 54 million yuan over the same period last year. As of the end of 2022:1) Accounts receivable and notes were $0.3 billion, an increase of 156.4% over the beginning of the year; 2) Prepayments amounted to $0.3 billion, a decrease of 27.8% from the beginning of the year; 3) Inventory of $0.2 billion, a decrease of 40.1% from the beginning of the year; 4) Contractual liabilities amounted to $180,000, a decrease of 98.4% from the beginning of the year. Net cash flow from operating activities in 2022 was $110 million, or YoY - 56.7%.
Investment advice: The company is a national-level “specialized, special and innovative” giant in high-end carbon fiber in China. Customer stickiness and demand certainty are strong. Implementing equity incentives in 2022 will help improve the governance structure and accelerate the release of business vitality.
The company is speeding up the construction of the third phase of the project in line with downstream demand. As the three production lines are put into operation, technological advantages are being transformed into industrialization capabilities. We expect the company's net profit from 2023 to 2025 to be 695 million yuan, 863 million yuan, and 1,014 million yuan respectively. The current stock price corresponding to PE from 2023 to 2025 is 32x/25x/22x, respectively. We maintain the “Recommended” rating, taking into account the space brought about by the release of production capacity.
Risk warning: downstream demand falls short of expectations, production capacity release falls short of expectations, etc.