Description of the event

The company released a 2022 report and a quarterly report for 2023. The company achieved revenue of 5.5 billion yuan in 2022, an increase of 32% over the previous year; net profit attributable to shareholders of the parent company was 470 million yuan, an increase of 22% over the previous year; net profit attributable to shareholders of the parent company after deduction was 260 million yuan, a decrease of 2% over the previous year

The company achieved revenue of 1.6 billion yuan in the first quarter of 2023, an increase of 31% over the previous year; net profit attributable to shareholders of the parent company was 160 million yuan, an increase of 119% over the previous year; net profit attributable to shareholders of the parent company after deduction was 100 million yuan, an increase of 57% over the previous year.

Incident comments

On the revenue side, the revenue of 2022 and 2022-Q4 companies increased 32% and 21%, respectively, and continued to grow rapidly. Most of these products achieved relatively rapid growth: the revenue of new energy, rail transit, and precision connectivity increased 95% and 109% year-on-year respectively. The highest growth rate was: revenue from smart home appliances, power products, and industrial automation increased 32% year on year, 25%, and 41% year-on-year, respectively. It is expected that 2022 will be mainly affected by the decline in investment in manufacturing. Among them, new energy-related businesses have all achieved relatively rapid growth, including electric vehicle-related new energy, rail transit, lithium battery-related precision connections, optical storage and charging, etc.

On the profit side, the company's gross profit margin in 2022 was 23.8%, down 2.8 pct from the previous year, mainly due to the increase in raw material prices (the gross margin of products other than precision connections all fell to varying degrees year-on-year) and changes in product structure (the gross margin of new energy, rail transit, and precision connections was relatively low). In terms of expenses, the fee rate during 2022 was 18.7%, a year-on-year decrease of 0.3 pct. Among them, the sales expenses ratio declined, the R&D expenses ratio increased, and stock option fees and interest on debt conversion were about 200 million yuan. Furthermore, the company achieved a fair value change income of 180 million yuan in '22 due to increased valuations of investment companies, indicating the increase in the company's investment capacity and contribution performance. In the end, the company's net profit attributable to shareholders of the parent company in '22 was 470 million yuan, an increase of 22% over the previous year; excluding the impact of stock option fees and interest charges on debt conversion fees, net profit attributable to shareholders of the parent company increased 5% year-on-year after deduction in '22.

The company's revenue increased 31% year on year in 2023Q1, continuing the high growth rate. The six major business segments are expected to achieve year-on-year growth, which once again validates the company's business growth. The gross profit margin for 23Q1 was 24.1%, which was basically the same as the previous year: the cost rate for the period was 17.9%, which was relatively stable year over year. Meanwhile, income from changes in fair value is 50 million yuan, which is expected to come from an increase in the valuation of investment companies. In the end, net profit attributable to shareholders of the parent company in 23Q1 more than doubled year on year: if the effects of stock option fees and total conversion fees were excluded, net profit attributable to shareholders of the parent company after deducting 23Q1 was 72% year-on-year.

In terms of other financial indicators, the 2022 and 2023Q1 companies achieved net operating cash flows of 0.2 billion yuan and net inflows of 100 million yuan respectively, indicating that the company is actively promoting production capacity construction.

The future growth potential of the company is emphasized once again. On the one hand, it comes from the deepening development of the company's multiple product lines and the continuous expansion of the product line; on the other hand, it comes from the benefits brought by the company's continuous equity investment. The company's net profit to shareholders of the parent company is estimated to be 720 million yuan in 2023, which is 21 times the corresponding valuation. Maintain a “buy” rating.

Risk warning

1. The risk of a sharp increase in the price of raw materials;

2. The pace of expansion in new fields fell short of expectations.