Event: The company released its 2022 annual report and the first quarter report of 2023. The company achieved revenue of 3.717 billion yuan in 2022, an increase of 10.77% over the previous year, achieved net profit of 211 million yuan, an increase of 3.37% over the previous year, and achieved net profit of 209 million yuan after deduction, an increase of 12.01% over the previous year; in the first quarter of 2023, the company achieved operating income of 987 million yuan, an increase of 19.17% over the previous year, and achieved Guimo's net profit of 40 million yuan, an increase of 24.44% over the previous year.
New business is expected to drive gross margin upward, and 23Q1 will be under pressure in the short term. The company's cumulative gross margin in 2022 was 11.59%, a year-on-year decline of 2.02pct. Among them, Q4 gross margin was 13.16%, an increase of 2.64 pct over the previous year. The average gross margin level of the company's various business segments is low. This is mainly due to the fact that revenue from other businesses with high gross margins, such as waste processing, was not transferred back to various main businesses in financial reports. Looking ahead, since the company added more manufacturing equipment, the company's quarterly gross margin fluctuations were mainly related to capacity utilization. The capacity utilization rate of the 23Q1 automobile business declined to a certain extent, causing the 23Q1 gross margin to fall 0.82 pct to 12.33% month-on-month. Furthermore, the overall gross margin decline in 2022 was also related to a sharp rise in the purchase prices of raw materials (mainly silicon steel, copper, etc.). In 2022, the cumulative company management expense ratio was 3.50%, up 0.58pct year on year, R&D expense ratio was 3.47%, down 0.36pct year on year, financial expense ratio was -1.85%, down 5.85pct year on year. The total cost rate for the period was 5.72%, down 0.45pct year on year. We believe that the motor industry is definitely in a “internal situation”, but with its advantages on the R&D side and scale, the company is expected to take an advantageous position in the next 2 to 3 years of industry reshuffle.
A new target with high gross margin can be expected to be implemented, and the new energy business will continue to expand. In the company's auto parts business in 2022, new energy achieved revenue of about 600 million dollars, a sharp increase over the previous year. The company is still expected to continue to sell to leading customers such as Geely Vero, Huawei, and BYD in 2023. We believe that the company has outstanding product manufacturing and R&D capabilities. In the context of stabilizing commodity prices in 2023, the steady gross margin of the NEV business will reach 15%.
In terms of the two-wheeler business, the company already accounts for a significant share of supply from leading customers such as Yadi and Emma. We believe that 2023 will still be a big year for electric two-wheelers to be shipped. Combined with the company's increased voice in the supply chain and upgraded product results, 2023 will usher in a major improvement in profitability. Furthermore, the company also has strong new business development capabilities in horizontal fields such as drones and construction machinery, and new targets can be expected to continue to be implemented.
The strategic layout of new energy is complete, and the industrial chain is expanding vertically. The company has a complete product layout in the motor business, and has stable product control capabilities from iron core stamping to fixed rotor assembly. We are optimistic that the company, as one of the leaders that produces its own molds and has a complete business layout, is expected to usher in a golden period of rapid growth in volume and price after the inflection point of the automobile industry reaches an inflection point in the automotive industry under the industry's general trend of increasing efficiency and power demand.
Investment advice: The company's net profit for 2023-2025 is estimated to be 264/3.42/480 million yuan respectively, EPS is 0.65/0.85/1.19 yuan respectively, and the price-earnings ratio is 19.30/14.88/10.62 times respectively. It is covered for the first time, giving it a “buy” rating.
Risk warning: Market competition intensifies, and the pace of new business development falls short of expectations