Incident: The company released its third quarter report. It achieved revenue of 1,377 million yuan in the first three quarters of 2022, an increase of 202.5%; achieved net profit of 33 million yuan, an increase of 91.4% over the previous year; achieved operating income of 508 million yuan in the third quarter, an increase of 257.3% over the previous year; and achieved net profit of 0.05 billion yuan, an increase of 1629.8% over the previous year.
Revenue structure adjustment+cost settlement delays caused a slight reduction in profit margins. The company achieved gross profit of 58 million yuan in the third quarter of 2022, with a gross margin of 11.36%, a decrease of 2.00 percentage points over the previous quarter. The decline in gross margin was mainly due to an increase in the share of the company's revenue from NEV ancillary products, which were relatively unprofitable in the third quarter, and the rise in raw material prices in the first half of the year was transmitted to this quarter through inventory turnover. As the company discussed price adjustment agendas with upstream suppliers, locked down some bulk materials, and began upgrading production line automation productivity to reduce technology costs, it is expected that its profit margins will gradually be repaired starting in the fourth quarter.
IGBT tension will be reduced by signing agreements with upstream vendors. The company has now reached long-term procurement and supply agreements with IGBT suppliers. The tight IGBT supply situation will be greatly alleviated in the fourth quarter, and it is expected that IGBT supply will continue to meet production needs after the first quarter of next year. Looking at the long term, the company is currently working to localize power chip procurement channels. While maintaining close cooperation with international suppliers, it will also gradually expand and promote the depth of cooperation with domestic manufacturers. Reaching cooperation with many manufacturers on semiconductor power modules is not only beneficial to ensuring the stability of the company's supply chain, but also helping the company improve its bargaining power, which is expected to reduce the profit pressure on motor controllers and electronic control assembly products.
A number of production expansion projects have been implemented, and the supporting situation is slowly progressing. In the third quarter of 2022, the company completed a number of capacity construction projects one after another, and is currently in the stage of rising production capacity. As products supporting SAIC-GM-Wuling hybrid models are about to be released, SAIC Chase logistics vehicles and commercial vehicles have also entered mass production, and revenue from SAIC Motor has great potential for growth; many products supplied with Geely have also entered the small-batch supply stage, and its subsequent revenue contribution is expected to increase a lot. Furthermore, the company is also laying out technical exchanges and project connections with new customers. The company's cooperative relationships with downstream benchmark customers are stable, and new construction capacity is expected to be rapidly digested.
Profit forecasts and investment suggestions: The successive implementation of production expansion projects has enabled the company to have sufficient production capacity to meet expanding customer needs. Furthermore, the company has cooperated with upstream suppliers in raw material procurement, etc., to further improve its own insurance and supply capacity, and profit margins are expected to be repaired in the fourth quarter. Judging from the long-term layout, the company is a domestic leader in single-tube parallel technology. While it has achieved a significant leading position in integrated products, it looks at cutting-edge fields such as silicon carbide and flat line motors. Product positioning is continuously upgraded, targeted models and orders are growing rapidly, and development prospects are clear. We expect the company's operating income from 2022 to 2024 to be 22.71/39.59/61.99 billion yuan, achieving net profit of 128/2.14/534 million yuan. The corresponding EPS is divided into 0.77/1.29/3.23 yuan/share, and the corresponding PE corresponding to the closing price on October 28, 2022 is 50.22/ 30.01/12.00 times, maintaining the “increase in holdings” rating.
Risk warning: sales of new energy vehicles fell short of expectations, upward product breakthroughs fell short of expectations, capacity expansion fell short of expectations, etc.
