1H22 performance is in line with our expectations
The company announced 1H22 results: revenue was 1.695 billion yuan, up 3.28% from the same period last year, down 1.13% from the previous month; net profit from its mother was 70 million yuan, corresponding to 0.17 yuan per share, down 39.23% from the same period last year and 21.57% from the previous month, which was in line with our expectations.
Trend of development
The performance of the second quarter was affected by the epidemic in the short term, and the company's overall business bottomed out and rebounded, which is expected to continue to improve. Affected by the COVID-19 epidemic in Shanghai and other places, the company's Q2 production stagnated for more than a month, which had a great impact on the first half of the year's performance, but still achieved Q2 revenue and profit month-on-month positive growth, showing strong downstream demand and performance bottomed out. The company's gross profit margin recovered rapidly in Q2, and the single-quarter gross margins of 2Q21, 3Q21, 4Q21, 1Q22 and 2Q22 were 15.3%, 12.6%, 10.5%, 10.1% and 12.34%, respectively. We are optimistic about the boost of the gradual repair of gross profit margin to the company's performance and 2H22's high performance growth and continued improvement in the future.
New energy electric drive business high growth, deeply bound to Huawei, BYD and other head customers, ASP up to more than 5000 yuan, vehicle mass production acceleration brings high performance flexibility. At the product level, the company extends from supplying motor stator and rotor core to stator and rotor assembly, the value of single motor increases from 500,800 yuan to 2300-3000 yuan, and the dual-motor model ASP breaks through 5000 yuan. At the customer level, the company is the core supplier of Huawei automotive electric drive system, and its products cover Huawei cooperative car companies such as well-off, Changan, BAIC, etc., and it is the exclusive supplier of stator and rotor assemblies for star mass-produced models such as Avita; as a new supplier of BYD, orders on hand are rising rapidly, and with the increase of the openness of BYD's supply chain, we believe that the company is expected to achieve the rapid growth of its share. At the same time, the company achieves mass production of Geely, United Microelectronics Corp, Schaeffler and other mainframe factories and Tier 1. We believe that as the sales of new energy vehicles continue to exceed expectations and the rapid iteration of superimposed electric drive technology, the company's electric drive business will be accompanied by the rapid growth of head customers such as Huawei and BYD, with high certainty and high flexibility.
Enter the battery precision structure business, around the core customer capacity layout. Based on strategic planning and actual business needs, Sun Company has set up a wholly-owned subsidiary in Ningde City, Fujian Province to lay out the battery precision structure business. We believe that the company has accumulated advantages in the field of metal stamping technology and moulds, and the precision structure of the incoming battery is the industrial realization of the existing technical advantages, while supporting the production capacity around the core customers, which is conducive to continuously deepening the cooperative relationship. We believe that the company's battery structure business development is the beginning of supporting core customers, the follow-up development is expected to get strong support and rapid growth, or become the company's second growth curve after the electric drive business.
Profit forecast and valuation
We keep our profit forecasts for 2022 and 2023 unchanged, with a net profit of 236,304 million yuan respectively.
The current share price corresponds to a price-to-earnings ratio of 30.3 times 2023 / 23.5 times 2023. Maintain an outperform industry rating and a list price of 26.20 yuan, corresponding to 44.9 times 2022 price-to-earnings ratio and 34.8 times 2023 price-to-earnings ratio, which has 47.9% upward space compared with the current stock price.
Risk
The expansion of new energy business is not as expected and the cost control is not as expected.
