Key points of investment:
Incident: The company released its 2022 annual report and the first quarter report of 2023. The company's revenue/net profit attributable to the mother/net profit after deducting non-attributable net profit in 2022 was 890 million/47 million/38 million yuan respectively, +22.83%/-14.65%/+6.89%, respectively. 4Q22/1Q23's revenue was 260 million/303 million, +102.37%/+84.27% year on year; net profit of return to mother was 0.07 million/00.6 million yuan, +5.16% year on year; net profit after deducting non-return mother's net profit was 0.05 million/00.3 million, -14.18%/-8.94% year on year.
Revenue from 1, 2022 & 1Q23 was steady, moderate and positive, and the segmented business grew steadily. The company's revenue grew steadily by 890 million yuan in 2022, an increase of 22.83% over the previous year. Among them, core device customization/general device distribution/software system development revenue was 580 million/260 million million/50 million, respectively +19.4%/+24.5%/+66.0% over the previous year. 4Q22 revenue was 260 million, +102.37%/+10.08% year-on-month; 1Q23 revenue was 302 million, +84.27%/+16.30% year-on-month, with impressive revenue performance.
2. Gross margin is under pressure in the short term, and R&D investment is increasing
1) Gross profit margin: Gross profit margin in 2022 was 12.64%, down 0.36 pct from the previous year; among them, core device customization/ general device distribution/ software system development gross margins were -2.07pct/+0.95pct/-3.63pct, respectively. The gross profit margin of 4Q22/1Q23 was 11.60%/8.11%, -9.14pct/-4.33pct compared to the previous year, which was due to the high base effect/impact of the expansion of hardware product sales scale, respectively.
2) Expense rate: The three-fee rate in 2022 was 3.36%, an increase of 0.48pct over the previous year; the sales/management/finance expense ratio was 1.08%/2.83%/-0.55%, respectively +0.36%/-0.10%/+0.22%, respectively; R&D expenses were 38 million, an increase of 77.63% over the previous year.
3) Non-net interest rate after deducting non-net interest rate: In 2022, net interest rate deducted was 4.25%, -0.63pct compared to the previous year.
3. Seize the opportunities of intelligent electrification. The number of current orders exceeded 13.5 billion, and the volume can be expected!
1) There are plenty of orders in hand. The company seizes opportunities for intelligent and electrified development and vigorously lays out related businesses in the automotive field, mainly focusing on cockpit electronic products such as automobile central control, LCD meters, and AR-HUD. Currently, the company's on-hand orders have exceeded 13.5 billion, and the orders collected to upgrade Tie1 are expected to begin mass production in the second half of the year; 2) The production capacity layout is perfect, and order volume can be expected. The company's main plant is expected to be completed by the end of 2023, and the first batch of production line equipment commissioning will be completed. The main plant will continue to expand production lines for simple modules, intelligent modules and screen display systems, and smart cockpit domain control. Production capacity planning can meet the production of targeted projects already in hand, and order volume can be expected.
Investment Strategy:
The company is upgraded to Tier 1, and the full-process manufacturing capacity will drive the increase in product value; at the same time, the company produces independently, costs are relatively controllable, and profitability will be improved. The company's net profit for 2023/2024/2025 is estimated to be 0.60/0.77/102 million yuan. The corresponding EPS is 0.75/0.97/1.27 yuan respectively, corresponding to the current stock price PE of 46/36/27 times. First coverage, giving a “buy” rating.
Risk warning:
Sales of major customers declined, raw material prices rose, and new customer development and batch production fell short of expectations.