FY22 performance is in line with market expectations
The company announced its 2022 results: realized revenue of 3,559 million yuan, YoY -24.83%; net profit of the mother was 801 million yuan, YoY -16.15%. The company's performance is in line with market expectations.
Development trends
The domestic production business has generally remained stable, and the trade business has been clearly affected by the pandemic. 1) The complex changes in the international situation in 2022 exacerbated macroeconomic fluctuations. The industrial chain was under pressure on various links such as material, delivery, and inventory consumption, which led to a certain slowdown in the company's operations. Looking at a single quarter, the company's 4Q22 revenue was 720 million yuan, YoY -36.5%; Guimu's net profit was 80 million yuan, YoY -52.0%. 2) By product, ceramic capacitors/tantalum capacitors/ceramic materials/microwave components/resistors achieved revenue of 11.7/0.5/1.0/22/0.3 billion yuan, YoY -6.7%/-21.6%/+52.5%/+27.7%/+21.2%, respectively. 3) By business, self-produced component business revenue was 1.48 billion yuan, YoY -3.1%; new materials business revenue was 1.0 billion yuan, YoY +52.5%. New material products formed a stable supply capacity, a high year-on-year increase; trade revenue was 1.94 billion yuan, YoY -36.8%. Affected by weak demand in the downstream consumer electronics market, trade revenue declined significantly.
Changes in product structure drove an increase in gross margin, and operating cash inflows increased sharply year over year. 1) Due to a decrease in the share of trade business, the company's gross margin increased 6.7 ppt to 41.6% year-on-year in 2022. 2) The management expense ratio increased 2.2 ppt to 6.2% year on year, mainly due to increased remuneration, real estate transfer depreciation and amortization, and increased agency fees. The sales and R&D expenses ratio increased 1.5ppt/0.7 ppt respectively over the same period last year. 3) Driven by the increase in gross margin, the company's annual net interest rate to the mother increased 2.3 ppt to 22.5% year-on-year. 4) Net cash flow from operating activities for the year was $930 million, or YoY +55.8%, mainly due to a year-on-year increase in government subsidies and a year-on-year decrease in procurement payments.
The industrial layout has blossomed more and more, and I am optimistic about the company's long-term development space. 1) Tianji Technology, a microwave device subsidiary, has annual revenue of 220 million yuan, YoY +22.3%, net profit of 0.7 billion yuan, and YoY +14.0%. The application for listing on the Science and Technology Innovation Board has been accepted. 2) Liya's subsidiaries are rooted in the field of hot new materials, and technology and products have reached a leading level. Liya Chemical achieved annual revenue of 80 million yuan, YoY +54.5%, net profit of 0.2 million yuan, YoY +286.9%, and completed the construction of a liquid polycarbon-silane production line within the year. The company increased the capital of Chengwei Precision Company through the Industrial Fund to increase its industrial layout in the field of ceramic-based composites. 3) The subsidiary Laidu International completed the acquisition of 73.9% of Singapore's Maxmega shares and continued to expand the ASEAN market.
Profit forecasting and valuation
Due to a certain delay in the pace of downstream demand, we lowered our 2023 net profit by 33% to 980 million yuan, and introduced 2024 net profit of 1.16 billion yuan. The current stock price corresponds to 2023/2024 20x/17x P/E. We believe that the company is expected to reach an inflection point in the economy in 2023, maintain outperform industry ratings and target price of 51.43 yuan, corresponding to 24x/20x P/E in 2023/2024, which has 23% upward space from the current stock price.
risks
Orders and product delivery fell short of expectations.