1. Event:
According to the company's quarterly report for 2022, the company achieved an operating income of 3.71 billion yuan in the first three quarters, an increase of 3.95% over the same period last year, and a net profit of 353 million yuan, an increase of 409.68% over the same period last year. Of this total, the company's Q3 realized revenue of 1.272 billion yuan in a single quarter, down 9.42% from the same period last year, and realized net profit of 342 million yuan, an increase of 4014.19% over the same period last year.
2. Profitability has increased steadily, and the ability of cost control has been strengthened: 22Q3's gross profit margin is 49.55%, which is higher than the same period last year (4.94pct) and 3.88pct (month-on-month). This shows that profitability is steadily increasing. On the expense side, the sales / management / R & D expenses of 22Q3 decreased by 7.33%, 6.12%, 5.39%, to 1.77, 380, 000. In addition, the financial expenses of the company's Q1-3 were 89 million yuan, down 61.81% from the same period last year, mainly due to the increase in exchange earnings and the decrease in interest expenses.
3. The asset structure is optimized and the cash flow is stable: since 2018, the company has implemented management reform, promoted fine management, paid close attention to business quality and cash flow, and the financial situation has been gradually optimized. The company's asset-liability ratio dropped to 46.97% from 62.76% at its peak, and the asset-liability structure was further improved. 22Q3's net operating cash flow fell 6.56 billion yuan to 43 million yuan compared with the same period last year, mainly due to a reduction in the scope of the merger as a result of the disposal of subsidiaries and a decrease in cash received from the sale of goods. At present, the operating cash flow of the company is still positive, highlighting the cash flow situation of the company for the better.
4. Transfer the equity of the subsidiary, optimize the debt ratio, continue to ease the financial and financial pressure, and focus on the new business direction of growth: on July 13, 2022, the board of directors agreed to transfer 100% equity of the wholly-owned subsidiary to SBL at a price of 159.5 million euros (about 1.076 billion yuan).
All the proceeds from this transaction will be used to repay the company's debt that has been / is about to mature, which will comprehensively improve the company's liquidity, significantly reduce interest-bearing liabilities, reduce the asset-liability ratio, and reduce high interest payments. it will help the company to improve its anti-risk ability and sustainable profitability, and focus its resources on growth business investment and promotion.
5. Consolidate the narrowband basic disk business, and reap the results of overseas market expansion: the company has the world's leading products and brands in the three mainstream digital standard areas of DMR/PDT/TETRA. With the gradual recovery of the post-epidemic industry and the superimposition of the company's brand effect, the basic disk business will achieve steady growth. In July, Teltronic, a wholly owned grandcompany of the company, signed a contract with partners on the Mexican Mayan railway TETRA communication system project, with a total project amount of about 46.95 million yuan, accounting for about 0.82% of the company's audited revenue in 2021. We believe that the performance of the contract will have a positive impact on the company's total revenue and profits in the future, and will help to further enhance the company's brand influence in Latin America and help market expansion.
In September, HMF, a wholly owned subsidiary of the company, won the bid for a national TETRA communication system and command and dispatching operation and maintenance project in Latin America, with a total amount of about 54.75 million yuan, accounting for about 0.94% of the company's audited revenue in 2021. We believe that as this project will provide customers with operation and maintenance services for the next 3 years, it not only continues to generate income, but also fully reflects the company's customer stickiness and long-term service value.
6. Increase the proportion of growth business and help the second growth curve: after years of investment, the company's growth business continues to optimize and run-in with customer demand, and begins to enter a stage of rapid growth. It is expected to become a new growth curve outside the narrowband basic disk business. We believe that under the trend of broadband, intelligence and platform, growth services will upgrade from narrowband to broadband, converge from private network to public network, and meet the diversified needs of customers, such as converged communications, multimedia command and scheduling and video applications. It is expected to continue a good growth trend and release performance elasticity.
7. Investment suggestions
Considering the continuous release of newly signed orders and the gradual growth of domestic order business, we continue to be optimistic about the company's leading position in the special network, and the improvement of domestic rail transit, 5G, public security network and other demand is also expected to lead to the improvement of the company's fundamentals. Considering the stabilization of the company's business, and at the same time, the one-time pre-tax gain of about 290 million yuan is expected to be obtained from the sale of Cypress shares this year, and the profit forecast is maintained. It is estimated that the revenue from 2022 to 2024 will be 66.5 yuan 7.73 billion yuan, respectively, and the earnings per share will be 0.22 yuan 0.22 yuan, corresponding to the closing price of 5.2 yuan per share on October 28, 2022. The PE is 23.5, 23.4, 20.0 times respectively. Maintain the "overweight" rating.
8. Risk hint
The sale of Cypress shares has not yet been completed, there is still uncertainty; overseas epidemic continues to repeat, customer orders are not sustainable; Sino-US science and technology war, resulting in instability of the company's supply chain; patent dispute with Motorola requires large compensation.