occurrences
Fenghua Hi-Tech released its 2022 annual report: the company achieved revenue of 3.874 billion yuan in 2022, a decrease of 23.37% over the previous year; achieved net profit of 327 million yuan, a decrease of 65.32% over the previous year; and achieved net profit of 60 million yuan after deduction, a decrease of 92.28% over the previous year.
Key points of investment
Weak consumption performance is under pressure, and warm spring will reach Q4 to recover month-on-month
The company's revenue and net profit both declined in 2022, and its full-year performance was under pressure. Although market demand in high-end application fields represented by 5G applications, new energy vehicles, photovoltaics, etc. is stable, the company's sales volume of such products increased year-on-year. However, due to comprehensive factors such as complex geopolitical changes and macroeconomic recovery falling short of expectations, consumer electronics markets in major application areas such as home appliances and communications experienced sharp declines in volume and price. At the same time, due to factors such as the company still in the construction period of major projects, the company's main product profit declined year-on-year, and gross margin fell to 17.97% (year-on-year - 12.96pct).
Looking at a single quarter, 2022Q4 achieved revenue of 955 million yuan, an increase of 19.27% over the previous quarter; achieved net profit of 14.2191 million yuan to the mother; and gross margin was 11.78% (+1.60pct over the previous quarter). As market inventories are digested and downstream demand recovers, and the company's high-end products are gradually released, the company's performance is expected to usher in restorative growth.
Focusing on the high-end circuit, continuously optimizing the product structure and customer structure in high-end technology research and development: R&D expenses of 225 million yuan for the full year of 2022, centralized R&D for high-capacity products and key electronic materials projects, concentrating superior resources to aggressively tackle problems; accelerate the deployment of R&D centers in core regions to create a platform conducive to attracting talents and technological growth, successfully introducing 2 key technical teams, 24 experts, consultants, and 14 PhDs to provide strong talent support for the company's R&D, manufacturing and sales industry chain.
In terms of high-end product output: in 2022, the proportion of the company's high-end capacitors and resistors output increased 14% and 6%, respectively; PIM micro integrated inductors were mass-produced; the self-production rate of high-end materials increased by nearly 10 percentage points; the company's other niche product series went hand in hand to successfully develop high voltage and large ripple-resistant cover products, copper electrode pressure-sensitive resistor products, etc. Some specifications of wafer porcelain dielectric capacitors reached the international advanced level and achieved domestic substitution in the supply chain of core customers. Supercapacitor 10 Farah products passed the national grid certification and achieved domestic substitution in the supply chain of core customers. Key technology A breakthrough.
In terms of expanding high-end market application fields: Focus on developing industry benchmark customers, promote the transformation of the market structure into a rapidly developing industry, focus on high-end application markets such as vehicle regulations, industrial control, medical, etc., and simultaneously lay out markets in emerging fields such as AR\ VR, wind power, and photovoltaics. More than 2000 products of the company have passed strategic customer certification, and the delivery of strategic customers of Xianghe Project's high-end MLCC has more than doubled year-on-year; sales of automotive products and the share of automotive electronics customers have continued to increase.
Profit forecasting
The company's revenue for 2023-2025 is 48.42, 60.53, and 6.779 billion yuan respectively, and the EPS is 0.54, 0.76, and 0.98 yuan respectively. The current stock price corresponding to PE is 34, 24, and 19 times, respectively, giving a “buy” investment rating.
Risk warning
The risk that the macroeconomic environment will continue to be sluggish, the risk that supply chain costs will rise, the risk that market demand will fall short of expectations, etc.