Incident: The company released its 2022 annual report, achieving revenue of 2,502 million yuan in 2022, an increase of 4.12% over the previous year; Guimu's net profit was 805 million yuan, a year-on-year decrease of 2.68%.
Revenue continues to grow, and R&D investment continues to increase
The company released its 2022 annual report. It achieved revenue of 2,502 billion yuan in 2022, an increase of 4.12% over the previous year; the net profit of the mother was 805 million yuan, down 2.68% from the previous year. The main reason for the decline in performance was the decline in gross margin of the agency business, the rapid growth in R&D investment, and the increase in credit impairment losses due to poor repayment. The company's cost rate for the period was 11.28%, an increase of 0.53 pct over the previous year, of which R&D expenses were 98.6944 million yuan, an increase of 22.4% over the previous year. The R&D expenditure rate reached a new high in recent years. In terms of profit margin, gross margin was 50.15%, down 1.36pct from the previous year; the net interest rate was 32.10%, down 2.30pct from the previous year. The main reason for the decline in profit level was the further decline in the gross margin of the agency business, which had a lower gross margin level.
On the balance sheet side, inventory was 672 million yuan, an increase of 61.95% over the previous year. Of these, inventory products were +59% year over year, raw materials were +79% year over year, and products were +24% year over year, indicating that the company is actively preparing goods, and delivery is expected to be accelerated after orders improve. On the cash flow side, net operating cash flow was 357 million yuan, a sharp decrease of 32.91% over the previous year. The main reason was that the company increased its inventory efforts, which led to a large increase in cash to purchase products and accept labor payments.
The gross margin of the self-produced business remained high. The new product expansion achieved a significant increase of 1,373 billion yuan in the company's self-produced business in '22, an increase of 1.89% over the previous year. Among them, MLCC revenue was 1,293 million yuan (-1.57% year-on-year), filter revenue of 21.56 million yuan (+8.90% year-on-year), and revenue from other products such as microwaves reached 58.05 million yuan (+324.86% year on year). The new category microwave business grew significantly; the gross margin of the self-produced business was 80.91%, an increase of 0.08pct over the previous year, and is expected to remain high in the future. In terms of military goods business, with the development of China's national defense industry, the equipment modernization process is accelerating. In particular, the electronic, informatization, intelligence and localization of equipment continues to advance, and the market prospects for high-performance, high-quality MLCCs as basic units are broad. We believe that the overall military industry sector is expected to maintain a high level of prosperity. The company's traditional specialty MLCC business is expected to achieve restorative growth. Self-production of new microwave categories may rapidly break through, and the company's self-produced business may continue to grow rapidly.
Renewable energy maintained a high boom, and the agency business achieved steady development
The company's agency business products are mainly electronic component products produced by well-known domestic and international manufacturers, and sales are concentrated in civil fields such as new energy and consumer electronics. In '22, the company's agency business achieved revenue of 1,104 billion yuan, an increase of 5.80% over the previous year. The main reason was that strong demand from the company's new energy customers hedged the sluggish demand of other industrial and consumer customers, driving the overall growth of the agency business; the gross margin of this sector business was 10.78%, a year-on-year decrease of 2.36 pct. The company's agency business continues to explore emerging industries and markets. On the basis of consolidating and strengthening cooperation with existing brands, it has signed more than 10 new brand agents, and the introduction of active components continues to increase, and the agency business may achieve stable development in the future.
Profit forecast: As the core supplier of military MLCCs in China, the company's self-production business is expected to fully benefit from the “14th Five-Year Plan” leapfrog weapon and equipment demand. It is expected that sales will stabilize in the next 3-5 years, and the new microwave business may achieve significant breakthroughs. Since the fundamental growth rate declined a lot in '22, due to prudential principles, operating income is expected to be lowered from 41.65/5149 million yuan to 3,033/3576 million yuan in 23-24, estimated to be 4.220 billion yuan in '25, net profit of the mother was lowered from 1,607/2.05 billion yuan to 993/1,232 million yuan, estimated at 1,474 million yuan in '25, and the corresponding PE was 18.14/14.47/12.09X, maintaining the “buy” rating.
Risk warning: risk of price reduction for military products; risk of changes in downstream market demand in the agency business; microwave business development falls short of expectations.