Event: On April 18, 2023, Yongding Co., Ltd. released its 2022 annual report. In 2022, the company achieved operating income of 4.228 billion yuan, an increase of 8.13% over the previous year, and achieved net profit of 226 million yuan to the mother, an increase of 87.37% after deducting net profit of 73 million yuan from the non-return mother, an increase of 188.59% over the previous year

Production declined, revenue increased, and net profit increased year-on-year. In 2022, the company achieved operating income of 4,228 billion yuan, an increase of 8.13% over the previous year, and achieved net profit of 226 million yuan to the mother, an increase of 87.37% over the previous year. Among them, due to complex influences such as the macro-operating environment and the company's adjustment of product sales structure, etc., it had an adverse impact on the company's customer demand, supply chain logistics, production and operation. The production volume of fiber optic cable and copper cable, which is the main business, fell 15.90% and 21.58% respectively from the previous year. Sales volume fell 14.29% and 21.91% respectively from the previous year, but revenue of optical cables and communication equipment did not decline but increased by 21.40% over the previous year. In terms of overseas business, affected by the international situation, the company's overseas market business declined, and production and sales fell year-on-year. In 2022, the company's overseas business revenue and operating costs decreased by 21.12% and 22.45% respectively compared to the previous year, and gross margin increased 1.48%.

The “fiber cable” structure has been optimized, and the layout of the entire optical communication industry chain has been gradually improved. In 2022, the company further improved the layout of the optical bar, optical fiber, and optical cable industries. The optical bar factory completed process debugging and achieved mass production, the optical fiber factory maintained large-scale production, the optical cable factory developed new products such as new special optical cables, optimized the product structure, and the company's profitability and market position in “fiber optic cables” gradually increased. In the field of optical communication, the company has achieved a full industry chain layout integrating optical chips - optical devices - optical modules - systems. The subsidiary Suzhou Dingxin Optoelectronics has increased research and development of laser chips and equipment investment. At present, it has begun communicating with various potential customers and providing various chips to customers for verification. AWG (array waveguide grating) and filter series wave-splitting products have been used in downstream products produced by the company. The laser chip project flowsheet was successful, and it is expected that equipment commissioning, production and sales will be completed in 2023. Among them, optical chips focus on passive wave filter (filter) chips, AWG (array waveguide) chips, and active laser chips. Optical devices and modules have all been produced on a large scale, and some products are at the forefront of the industry.

The automotive wiring harness market has been rising steadily, and the new energy vehicle business has grown dramatically. The company's main products in the automotive wiring harness sector include body assembly wiring harnesses, instrument panel harnesses, door control system harnesses, airbag harnesses, roof harnesses, front harnesses, electric jet engine harnesses, new energy high voltage harnesses, etc., which are mainly used in traditional OEMs, NEV OEMs, Cummins commercial engine wiring harnesses, long-term energy storage and other fields. The automotive wiring harness sector achieved revenue of 1,651 billion yuan in 2022, an increase of 28.85% over the previous year, accounting for 40.22% of total revenue. In 2022, the company strengthened research and development in front-end technology and processing technology, overcame the technical difficulties of high-strength small-diameter wires such as the 0.13mm2 crimping process. New breakthroughs were made in high-voltage wiring harnesses, wire harness lightweighting, and production automation for new energy vehicles, which have been applied to many mass-produced NEVs in China. The automotive wiring harness sector has applied for a total of 46 patents, including 2 invention patents, 41 utility models, and 3 design patents. In addition, the company cooperated with a number of new energy emerging automobile brands, passed system approval from OEMs such as BYD, NIO Auto, Xiaopeng Motor, Dongfeng Motor, Rantu Auto, and BAIC Heavy Truck, and obtained targeted projects such as BYD, SAIC Volkswagen, SAIC GM, Cummins, Huawei, and Jixiang Smart Drive to achieve official mass production and operation of fully automated high-voltage wiring harness production lines.

Broaden the “moat” of the superconductivity business, and the industrialization of high-temperature superconductors is being implemented at an accelerated pace. The company broadened its superconducting business “moat” and continued to improve the performance of high-temperature superconducting strips. The company has unique magnetic flux nailing technology to develop high-current superconducting strips for use in high temperature magnetic fields, and promotes their application in superconducting induction heating and controllable nuclear fusion reactors. In 2022, it successfully obtained the R&D task of “High-performance REBCO Long Strip Engineered Preparation Technology”, a sub-project of the “Key Technology Development and Magnet Development of Fusion CICC High Temperature Superconducting Magnets” project in the “National Magnetically Constrained Nuclear Fusion Energy Development Research Project” of the national key R&D program. The construction of the “cold-insulated high-temperature superconducting DC cable” project continues to be carried out, key equipment has been completed, and the exemplary superconducting cable will be officially connected to the network in 2023.

Suggestion: We believe that the company is on the dual track of automobile wiring harnesses and optical modules, and will maintain high growth in the future.

It is predicted that the company's revenue for 2023-2025 was 64.26/ 80.32/ 9.639 billion yuan, an increase of 52%/25%/20% over the previous year. The company's net profit to the mother was 3.19/ 459/629 million yuan respectively, up 40.9%/44.0%/37.0% year-on-year, corresponding to EPS 0.23/0.33/0.45 yuan, PE 25.2/17.5/12.8; initial coverage, giving a “increase in holdings - B” rating.

Risk warning: Optical fiber cable collection falls short of expectations; market competition continues to intensify; R&D investment has a long payback period.