Performance review
2022 and 1Q23 results are in line with our expectations
The company announced 2022 and 1Q23 results: 2022 revenue was 940 million yuan, an increase of 25.7%; the net profit of the mother was 90 million yuan, down 17.9% from the same period, in line with our expectations. 1Q23's revenue was 280 million yuan, an increase of 44.4% over the same period, and the net profit of the mother was about 21 million yuan, an increase of 8.5%, in line with our expectations.
Development trends
Industry side: The company strengthened its strategic customers for new energy and achieved rapid revenue growth. The growth of the OEM market in 2022 showed significant structural differentiation. New energy industries such as lithium batteries and photovoltaics continued to maintain a high growth rate, while the company continued to upgrade its competitiveness in the new energy sector by adjusting prices and strengthening customer response.
Considering the high concentration of customers and price sensitivity in the new energy sector, the company actively adjusted prices to enter the new energy market. According to our estimates, the price of the company's servo/PLC in 2022 was about 495 yuan/unit and 480 yuan/unit, down 4% and 8% from the previous year. The gross margin of the overall servo and PLC also declined 9.55ppt and 9.5ppt over the same period last year. Under this, the company also continues to win key customers in the new energy sector. We expect that the company's downstream new energy will account for about 50% in 2022, and according to MIR data, the company's servo market share in 2022 will be about 3.4%, an increase of 0.6ppt over the previous year.
Product side: The company's product line continues to be rich, and convertible bond raising is deployed in the industrial/precision transmission and microinverter markets to strengthen the company's industrial control solution capabilities and market space. (1) New products: In 2022, the company launched new products such as AMZ integrated steppers, direct drive motors, linear motor modules, TOF light sensors, etc. In addition, the company's research projects also include new products such as SCARA robots, smart elevators, and the Internet of Things, to continuously upgrade the competitiveness of the solution. (2) Convertible bonds: According to the company's announcement, the company plans to raise no more than 750 million yuan of convertible bonds (the total investment is expected to be 1 billion yuan), of which 560 million yuan is planned to be invested in high-efficiency motors such as magnetoresistive motors, industrial transmissions such as inverters, and precision transmission fields such as screws and precision rails; of these, 220 million yuan is proposed to be invested in micro-reversing projects, which have strong synergies with the company's existing industrial control business in SMT, DIP, testing, assembly, etc. We believe that the company's continuous development of new products will help the company fill gaps in the fields of high-efficiency motors, linear drives, etc., and open up market space. It is expected to continue to bring growth momentum to the company in the medium to long term.
Profit forecasting and valuation
As competition in the industry intensified and the company's price adjustment strategy led to a year-on-year decline in gross margin, we lowered 2023/24 net profit by 12.9%/4.9% to 192/294 million yuan. The current stock price corresponds to the 2023/24 26.1x/17.1x price-earnings ratio. It maintains outperforming industry ratings, but due to the decline in the short-term sector valuation center, we lowered our target price by 25% to 45 yuan, corresponding to the 35.3x/23.0x price-earnings ratio of 2023/24, respectively. Compared with the current stock price, there is still room for a 35% increase.
risks
Macroeconomic fluctuations, increased competition in the industry, and the progress of new products fell short of expectations