Revenue growth slowed in the first half of the year, and gross margin declined slightly. 2022H1 achieved operating income of 443 million yuan, an increase of 13.94% over the previous year; achieved net profit of 194 million yuan, an increase of 68.50% over the previous year; the company's gross profit margin was 48.83%, a decrease of 2.76pct over the previous year. The company achieved operating income of 218 million yuan in the second quarter, an increase of 86.16% over the previous year, and a decrease of 3.37% over the previous quarter; it achieved net profit of 87 million yuan, an increase of 142.53% over the previous year and a decrease of 19.07% over the previous quarter. The gross profit margin for the second quarter was 49.62%, a year-on-year decrease of 1.75 pct and an increase of 1.56 pct over the previous quarter. By business, precision guidance products achieved revenue of 440 million yuan, an increase of 13.90% over the previous year; the communication data chain business achieved revenue of 0.2 billion yuan, an increase of 61.47% over the previous year. The company currently has a number of research projects for precision guidance products. As the ongoing projects are finalized and mass-produced, the company's performance is expected to continue to grow rapidly.
Expenses were well controlled during the period, and net interest rates increased dramatically. The company's expenses rate for the period was 6.28%, a year-on-year decrease of 2.59 pct. Among them, the sales expense ratio was 0.21%, a year-on-year decrease of 1.35 pct, mainly due to the calculation of guarantee premiums in accordance with the warranty policy. The management fee rate was 4.21%, an increase of 0.36 pct over the previous year.
The R&D expenditure rate was 4.17%, an increase of 1.35 pct over the previous year, and R&D expenses were 18 million yuan, an increase of 68.54% over the previous year. The financial expense ratio was -2.32%, a year-on-year decrease of 2.95pct, mainly due to a decrease in current loans, a higher capital stock than the previous period, and higher interest income. The company's net interest rate was 43.76%, an increase of 14.17% over the previous year. It was mainly related to the decline in the company's expenses rate during the period, the increase in investment income, and the return of credit impairment losses.
Inventories, contract liabilities and orders have increased dramatically, and cash flow from operating activities has improved markedly. The company's inventory was 916 million yuan, an increase of 145.50% over the previous year and an increase of 60.51% over the beginning of the period. Contract debt was 146 million yuan, up 598.42% year on year and 12.31% over the beginning of the period. In February 2022, the company announced the signing of two new order contracts for certain supporting products, totaling 2,407 billion yuan. Inventory, contract liabilities, and orders have all increased dramatically, indicating strong downstream demand, which will support the company's future performance growth. The company's net cash flow from operating activities was 615 million yuan, an increase of 710 million yuan over the previous year, mainly due to an increase in sales repayments.
Investment advice: The company is one of the few domestic companies that can produce millimeter-wave active phased microsystem products. The projects that have been finalized and mass-produced have been followed up with users for more than ten years, and the user stickiness is good. National defense informatization is advancing at an accelerated pace, and the company's defined products are expected to be mass-produced. Currently, the company has a number of research projects, which are expected to provide strong support for future performance growth after finalization. We forecast the company's net profit from 2022 to 2024 of 319 million yuan, 444 million yuan, and 581 million yuan respectively. The corresponding PE is 525, 37.6 million, and 28.8 million respectively. Maintain an “increase in holdings” rating.
Risk warning: The development progress of new projects is slowing down, and the pace of delivery of military goods is slowing down.