The 2022 results are in line with our expectations

The company announced its annual performance report: revenue of 3.836 billion yuan in 2022, +36.49% year on year; net profit of the mother was 1,007 billion yuan, +21.21% year on year. Q4 revenue for a single quarter was 1,020 million yuan, +29.1%/-3.2% year-on-month. Net profit of the mother was 315 million yuan, +12.9%/+21.6% year on year; net profit of the non-return mother was 277 million yuan, +31.2%/+3.4% year on month. The non-recurring income was mainly income from changes in fair value.

The performance is in line with our and market expectations.

Development trends

Continued to benefit from the rapid development of new energy and photovoltaics: Revenue increased year-on-year in 2022, mainly due to strong demand for new energy and photovoltaics. According to CPC, domestic NEV sales in 2022 were 6.887 million units, +93.4% year on year; according to the National Energy Administration, domestic PV installed 87.41 GW in 2022, +60.3% year on year. The company is a leader in photovoltaics and new energy thin-film capacitors, and its performance growth rate is basically in line with the growth of the industry.

The share of the automobile business increased, and gross margin declined: The gross profit margin for the whole year of 2022 was 38.31%, -3.84ppt compared to the previous year, mainly due to the increase in the share of the automobile business with low gross profit, which lowered the average gross profit margin. 4Q22 gross profit margin was 38.43%, -2.94ppt/+0.6ppt compared to the previous quarter. The boom in the new energy business led to a month-on-month increase in revenue. The company's automobile business accounts for more than 30%. We believe that downstream automobile customers are scattered, and profitability is difficult to reach the level of standard products such as industrial/consumer products. Therefore, looking at the medium to long term, we believe that the continued increase in the share of the automobile business may put some pressure on the overall gross margin level, but as an industry leader, we believe that the company's scale advantage is remarkable, and its profitability far exceeds the industry average.

The cost rate has been steadily declining, and the company is speeding up the improvement of the level of automation. Benefiting from the advantage of scale, the company's expense ratio maintained a steady and declining trend in 2022. The sales/management/R&D expenses ratio in 2022 was 1.4%/4.3%/3.5% respectively; the Q4 single-quarter sales/management/R&D expense ratio was 0.9%/4.5%/3.8% respectively; at the same time, the company accelerated the level of automation, improved product quality, and reduced production costs.

The company is the core beneficiary target of new energy. The industry is booming and the company's supporting production capacity is expanding. Furthermore, we believe that the company's middle and high-end customers continue to expand, the level of automation and information system construction continues to improve and improve, and the cost of upstream materials continues to decline, which is beneficial to the company's profit release. We believe that as a leader in the global thin-film capacitor industry, the company has technology and brand premiums, and is expected to maintain leading product iteration capabilities. We are optimistic that demand growth plus brand strength will double hit the company's high growth.

Profit forecasting and valuation

In view of increased competition in the NEV industry, we lowered the net profit of the mother in 2023 by 6.6% to 1,223 million yuan; the net profit of the mother in 2024 was reduced by 11.8% to 1,559 billion yuan. The current stock price corresponds to 23/24 P/E 27/21 times. We continue to outperform the industry rating. Considering the downward shift in the valuation center of the new energy industry, we lowered our target price by 14.5% to 173.88 yuan, corresponding to 32/25 times P/E in 23/24. There is room for 19.1% increase from the current stock price.

risks

Prices of upstream bulk metal materials are rising; demand for raw material base films is in short supply; demand for new energy is falling short of expectations.