Event: Leimu Co., Ltd. released its 2022 annual report and 2023 quarterly report. In 2022, the company achieved revenue of 931 million yuan, YOY +35.75%; the net profit of the mother was 68 million yuan, YOY +43.22%; gross profit margin was 25.74%, down 0.54 pcts from the previous year, and the net interest rate was 7.34%, an increase of 0.38 pcts over the previous year. In the first quarter of 2023, the company achieved revenue of 233 million yuan, YOY +14.37%; net profit of 20 million yuan, YOY +33.86%; gross profit margin of 27.39%, an increase of 2.66 pcts over the previous year, and a net profit margin of 8.62%, an increase of 1.25 pcts over the previous year.
Operations are steady, moderate and positive, and profit margins have increased month-on-month. 2023Q1 achieved revenue of 233 million yuan, +14.37% year-on-year /-10.04%; gross profit margin 27.39%, year-on-year +2.66 pcts/+2.12pcts month-on-month, net interest rate 8.62%, and +1.25 pcts/month-on-month +4.85pcts. The company's profits were affected to a certain extent in Q4 2022 due to the pandemic. As production delivery gradually resumed, 2023Q1's profitability improved.
There is a complete range of automotive connectors, and revenue is growing rapidly. Looking at revenue split, Laimu Auto's connector business revenue in 2022 was 667 million yuan, YOY +46.66%, accounting for 71.68% of total revenue, an increase of 533 pcts over the previous year; the mobile phone connector business revenue was 204 million yuan, YOY +22.87%, accounting for 21.89% of total revenue, a year-on-year decrease of 2.30pcts. The company has a complete range of products in the field of automotive connectors. Its products cover application fields such as new energy vehicles, ADAS, and intelligent connectivity, and has supplied well-known domestic and foreign auto parts companies such as Valeo, Magna, Costar, BYD, Honeycomb Electric Drive, and Huichuan Technology. We believe that automobile electrification lays the foundation for the company's rapid development, and automobile intelligence is the driving force for the company's future growth. As the company continues to cultivate in the fields of automobile electrification and intelligence, and the production capacity of the Jiangsu base gradually climbs, it is expected that the company's performance will be further enhanced.
Precision manufacturing capacity expanded horizontally, opening up a second growth curve for connectors. In 2023, the company plans to launch new projects such as photovoltaic inverter-end multi-core integrated quick-lock communication module connectors, roof photovoltaic connectors, 800G optical module case products, 1500V energy storage connectors, hydrogen energy battery pack test benches, etc., to expand the application of precision connectors and structural components products and technology to the fields of photovoltaics, optical communication, energy storage, hydrogen energy batteries, etc. We believe that as the company's product line is gradually enriched, new profit growth points will be formed, thereby further increasing the company's profitability and enhancing the company's overall strength.
Equity incentives bind the interests of core employees to help the company develop in the medium to long term. On April 29, the company announced the 2022 Stock Options and Restricted Stock Incentive Plan, which plans to grant 3.283,200 stock options to 118 directors, executives and core technical personnel, accounting for a total of 1% of the total share capital. Of these, 2,626,600 stock options were granted for the first time, accounting for 80% of the total stock options granted under this incentive plan. The initial grant price was 11.69 yuan/share. Stock options and restricted stock incentives were unlocked 12/24/36 months after the grant date. The sales restrictions were lifted at 30%/30%/40% respectively. The unlocking conditions were based on 2022 operating income, and the compound revenue growth rate for each year from 2023 to 2025 was not less than 50%. The estimated amortization expenses for 2023/2024/2025/2026 are 80.18/133.29/ 82.89/ 297,700 yuan respectively. The total expenses are estimated to be 3.2613 million yuan. This equity incentive shows the company's confidence in future development, which is conducive to mobilizing the enthusiasm of the core team, improving the company's long-term incentive mechanism, enhancing the company's core competitiveness, and promoting the company's long-term development.
Investment advice: We expect the company's net profit to be 133/2.15/324 million yuan in 2023-2025, corresponding to 28.7/17.7/11.7 times the PE value for 2023-2025, giving it an “increase in holdings” rating.
Risk warning: new product sales fall short of expectations; risk of vehicle price war; risk of increased industry competition.