occurrences
On August 26, 2022, the company released its 2022 interim report. In 2022, H1 achieved a total operating income of 1,231 million yuan, a decrease of 33.34% over the previous year; the net profit returned to the mother was 377 million yuan, a decrease of 45.71% over the previous year.
On September 2, the company issued an announcement that its subsidiary Xuanyuan Intelligent Driving received a notice for the development and trial production of parts from GAC Aian, which allowed preliminary work on development and trial production to be carried out.
Brief review
Downstream demand fluctuates in the short term, and equipment orders are expected to pick up during the 14th Five-Year Plan period. Recently, the company released its 2022 mid-year report. 2022H1 achieved revenue of 1,231 million yuan, a decrease of 33.34% over the same period (1,847 million yuan), and achieved net profit of 377 million yuan to the mother, a decrease of 45.71% over the same period last year (694 million yuan). The sharp decline in the company's operating income and net profit was mainly affected by factors such as the international situation, epidemic control, and procurement plans for model projects. By business, 2022H1's infrared-related business revenue was 1,150 million yuan, a year-on-year decrease of 23.39%, while the revenue of traditional ammunition and information-based ammunition was 63 million yuan, a decrease of 79.36% over the previous year. Changes in the infrared and traditional ammunition business are mainly due to short-term product demand fluctuations. Looking at the long term, the company's main business is infrared chips, complete machines, optoelectronic systems, and downstream demand for the entire weapon system series products continues to be strong. As the only private enterprise with overall scientific research and production qualifications for complete equipment systems, the company is leading the technology domestic market and is gradually opening up the market space for complete weapon systems. Orders are full, and the growth rate of performance is guaranteed in the future.
In terms of profitability, the company's overall gross margin in 2022H1 was 53.38%, a year-on-year decrease of 2.55 pcts. While the sales scale declined, the company's operating costs rose, especially the rise in electronic material procurement costs and labor costs, which had a certain impact on the company's gross margin. The company's expenses rate for the period was 7.33%, a year-on-year decrease of 1.12 pcts.
Among them, sales expenses were 24 million yuan (-43.59%), and the cost rate was 1.93% (-0.58pct), mainly due to a reduction in foreign agency fees, technical service fees and billing maintenance costs; management expenses of 89 million yuan (+ 3.44%), and the cost rate was 7.25% (+1.19pcts), mainly due to the company's adjustment of the remuneration structure to increase labor costs; R&D expenses were 217 million yuan (+44.02%), mainly due to the one-time upfront cost of 502B and TN2 projects last year There was no such situation this year, and the fee rate was 10.60% (+7.06pcts). The reduction in the cost rate during the period reflects the company's good level of expense management throughout the year.
Looking at the balance sheet, 2022H1 inventory and contract liabilities were 1,704 million yuan (+2.04%) and 387 million yuan (-2.62%) respectively, maintaining a high level, which fully reflects the current strong downstream demand. To this end, the company has increased procurement and is actively preparing goods, and the company's future performance is highly predictable. With the bidding for multi-model projects, future product orders are expected to grow rapidly, market share will increase further, and the company's performance is expected to continue to improve.
New breakthroughs have been made in the civilian sector, which is expected to contribute to new performance growth points in the future. Xuanyuan Intelligent Driving, a wholly-owned subsidiary of Gaode Infrared, received the “Notice of Component Development and Trial Production” from GAC Aian New Energy Vehicle Co., Ltd. The infrared (night vision) camera technical plan submitted by Xuanyuan Smart Car can meet the requirements of GAC Aian, and preliminary work on development and trial production can be carried out first. Xuanyuan Intelligent Driving undertakes the manufacturing and supply of the infrared (night vision) cameras in the notice. Following the successful application of the company's infrared assisted driving system to the Dongfeng “Warrior Technology” luxury electric off-road vehicle front assembly project, this cooperation is another target for domestic passenger car infrared front-loading projects. In the future, mass production will be carried out with the model according to vehicle manufacturer node requirements. The current in-depth cooperation between Xuanyuan Intelligent Driving and Dongfeng and GAC, two major domestic car manufacturers, will also accelerate the company's subsequent cooperation with other car companies in the fields of passenger cars and commercial vehicles. With the maturity of infrared detector wafer packaging technology, the cost of next-generation infrared thermal imaging obstacle avoidance systems has declined markedly compared to before. It is expected that from the second half of the year to next year, a number of targeted development work for passenger cars and commercial vehicles will be completed one after another, which is expected to open up more extensive infrared-assisted driving space and continue to contribute new growth points to the company's performance growth.
Military goods benefited from the release of weapons and equipment during the 14th Five-Year Plan period. The decline in the cost of civilian goods opened up market space, and infrared military products continued to penetrate the market space. The technical advantages were obvious, and bidding results can be expected in the future. The company successfully set up a full-array uncooled, tellury-cadmium-mercury and Class II superlattice-cooled infrared detector chip batch production line covering the world's major technology routes with full HD resolution, higher sensitivity, and smaller pixel size with completely independent intellectual property rights. It was the first private enterprise in China to obtain overall qualification for complete weapon systems. It was the first private enterprise in China to obtain overall qualification for a complete weapon system. It has successfully obtained the overall scientific research and production qualification of a certain type of complete equipment system, marking the company's leap from an infrared thermal imaging manufacturer to an overall equipment system manufacturer. Currently, our military is in the process of speeding up the construction of national defense informatization. Infrared detection is one of the essential technologies in the construction of national defense informatization, and is widely used on various military types and multi-weapon platforms. The company has excellent bidding results for various projects in various fields such as infrared detection core chips, subsystems, and complete equipment systems. The company's products have obvious advantages in domestic precision guidance overall system model products and related parts. They have exclusive advantages in certain key markets. It is expected that they will continue to benefit from model volume during the 14th Five-Year Plan period, and orders are expected to pick up.
Reduced costs have opened up application space, and the civilian market is actively cultivating multiple performance growth points. As the epidemic enters the normalization stage, the company's infrared temperature measurement products for epidemic prevention account for a very small share of revenue. With mass production of wafer-level packaged detector chips, the company opened up infrared core design and application solutions to the entire industry through the infrared “core” platform. During the reporting period, the company's subsidiary Smart Sensing Technology used temperature measurement and epidemic prevention products as an opportunity to apply infrared thermal imaging technology to many innovative industries such as artificial intelligence, the Internet of Things, 5G, smart cities, smart hardware, consumer electronics, etc., and gradually achieved leaps and bounds in other emerging application fields. As a leading domestic infrared company, the company is actively expanding downstream application fields. New breakthroughs are expected to continue in the future, opening up a broad market space for civilian use.
Strong strength bound to core model military orders is expected to pick up. Civilian goods are expected to open up a broad market space, maintain the military market for “buy” rated military goods companies, establish a high barrier of technology+qualification+talent. Having technical research and development capabilities for integrated weapon systems and supporting core models and equipment, is expected to fully benefit from model release in the future. In recent years, bidding performance has been excellent and revenue has been achieved. In the future, military goods orders are expected to pick up a larger market for optoelectronic systems and complete weapon systems. New breakthroughs have been achieved in the field of assisted driving in the civilian market, accelerating the expansion of security, consumer electronics, machine vision and overseas markets, and entering massive emerging markets with industry giants. The company's net profit for 2022-2024 is estimated to be 1,274 billion yuan, 14.26 and 1,658 billion yuan respectively, with year-on-year increases of 14.69%, 11.91%, and 16.27% respectively. EPS is 0.39, 0.43, and 0.50 yuan respectively. In response to the current stock price of 2022-2024, PE is 37.49, 33.50, and 28.81 respectively, maintaining the “buy” rating.
Risk analysis
Fluctuations in orders for model-type products;
The number of weapon systems released fell short of expectations;
The expansion of the civilian market fell short of expectations.