Event

According to the company's annual report of 2022 and quarterly report of 2023, the operating income in 2022 was 1.714 billion yuan, an increase of 15.96% over the same period last year; the net profit was 283 million yuan, an increase of 3.29% over the same period last year; the net profit from non-return was 265 million yuan, down 2.27% from the same period last year; basic earnings per share is 0.75 yuan In 2023, Q1 achieved an operating income of 497 million yuan, an increase of 5.59% over the same period last year, and a net profit of 114 million yuan, an increase of 31.01% over the same period last year.

1. Rapid development of business in aviation, aerospace and other special fields

In 2022, business income in aviation, aerospace, shipping and other special applications reached 998 million yuan, an increase of 13.51 percent over the same period last year. The gross profit margin was 63.89%, an increase in 2.98pct compared with the same period last year. The scale of state investment in aviation, aerospace and other industries has increased, and the variety and quantity of power products developed by the company have continued to increase in the stage of batch delivery. In recent years, the independent and controllable policy promotes the rapid growth of the domestic power supply electronic supporting industry. As a domestic high-performance power supplier with independent innovation capability, the company is expected to continue to benefit from the in-depth research and development of domestic demand for SiP power microsystem products in aviation, aerospace and other special fields.

2. the demand for communications business is growing, customer satisfaction is improved, server power products are well developed, and the business income in the field of communication and network for mass production is 651 million yuan, an increase of 19.85% over the same period last year. The gross profit margin was 24.80%, down 1.95pct from the same period last year. The "5G Communication and Server Power expansion Project" of Shenzhen Leineng, a wholly-owned subsidiary, took the lead in upgrading the production line in the field of communications and server power supply, greatly increasing single-line production capacity and laying a solid foundation for mass production. At the end of 2022, the Yongli Science and Technology Park with Yongli Science and Technology as the main body was basically completed and put into use at the beginning of 2023, enhancing the production capacity and customer service capacity of Yongli Science and Technology.

In the field of server power supply, the company focuses on DC input and high-power product research and development, at the same time, increases the research and development of server module power supply, and completes the development of IC packaging module power supply and high-power bus conversion module to provide a complete solution for server power supply.

We believe that with the gradual improvement of the product matrix in the field of server power supply and the upgrading of automatic production lines, the company has the basis of mass production and is expected to become the next rapid growth point of the company.

In 2022, the company's overall gross profit margin was 47.8%, an increase of 0.52 pctgrame 2023Q1 gross profit margin of 49.19%, and an increase of 4.16pct over the same period last year.

3. Continue to optimize the cost structure and increase R & D investment for many years: the overall expenditure rate in 2022 is 26.34%, an increase of 2.01pct over the same period last year. Among them, the sales / management / R & D / financial expense rates are 3.86% 5.80% 15.15% 1.53% Cindy-0.23/+0.59/+1.58/+0.07pct respectively.

The company's R & D investment continues to increase, and the rate of R & D expenditure is increasing year by year. Relying on the SiP Microsystem Engineering Technology Center, the company has built a high-end packaging technology platform for microelectronics and microcircuit products, and has carried out a number of SiP process technology research and development work aimed at improving the integration density of integrated circuit micromodules, hybrid integrated circuit module power supplies and motor drivers. In 2022, the company developed many series of module power supply, including brick module, inch module, thick film hybrid integrated circuit process module, surge suppression module, custom power supply for aerospace, mobile base station power supply for 5G, high-efficiency high-power power supply and power supply system, integrated circuit micro-module, motor drive module and components, etc.

4. The increase in demand leads to an increase in the payment of raw materials, and 2023Q1 has improved: the net cash flow generated by operating activities in 2022 was-303 million yuan, which decreased by 365.93% over the previous year, mainly due to the discount of 140 million yuan of bills receivable in the reporting period included in fund-raising activities, resulting in a decrease in operating cash inflows; the company's business growth and increased order demand led to an increase in reserve and more payment for raw materials. The increase in personnel leads to an increase in the salary and expenses of the staff and workers. The company sells mainly on credit, and some customers settle bills or fail to repay in the reporting period. The net cash flow generated by 2023Q1's operating activities is-103 million yuan.

5. Dingzeng smoothly landed to expand production capacity and anchored the space for long-term growth according to the company's announcement and prospectus on October 14, 2022, the company raised a total of 1.581 billion yuan and a net fund of 1.547 billion yuan. Among them, the funds raised are as follows: (1) the amount of capital items for the expansion and commissioning of special power supply is 949 million yuan, and the construction period is expected to be 2 years, starting production in the third year, reaching production in the sixth year, and is expected to contribute 1.25 billion yuan in income and 298 million yuan in net profit every year after reaching production. (2) the investment of the industrialization project of high reliability SiP power microsystem products is 167 million yuan, of which the construction period is 2 years, the production starts in the third year, and reaches production in the sixth year. After reaching production, it is expected to contribute 250 million yuan in revenue and 47 million yuan in profit every year. (3) the total investment of the 5G communication and server power expansion project is 110 million yuan, with a construction period of one year, starting production in the second year and reaching production in the fourth year. It is estimated that the annual revenue will be increased by 300 million yuan and the net profit will be 23 million yuan.

According to the prospectus, after the investment project is landed and completed, the company's product capacity will be greatly increased, and the production capacity of special power products, communications and network products, and SiP power microsystem products will be increased by 70.31%, 71.75% and 477.10%, respectively. With the fixed increase landing to open the capacity space, the project is invested in special power supply, high reliability SiP power micro-system, domestic alternative space is broad, the company is expected to continue to increase market share, medium-and long-term performance is firmly supported.

6. Investment suggestions:

2022Q4 is affected by the epidemic, some of the company's production lines and construction shutdown caused delivery delays, causing short-term fluctuations to the overall performance development. At the same time, the impairment loss of assets is 40 million yuan, of which Wynn provides for goodwill impairment of 30 million yuan. We believe that with the smooth landing of the fund-raising project, the production capacity of special power and SiP power products is gradually climbing, and the server power supply is delivered in large quantities, laying a solid foundation for the company's performance in the next 3-5 years. Considering the impact of the epidemic on the shutdown and construction delay of the company's production line in 2022, and lowering the profit forecast, it is estimated that the revenue in 2023-2025 will be adjusted from 27.76/37.14/N/ A billion yuan to 2.86 billion yuan, respectively, and earnings per share will be adjusted from 1.44/1.99/N/A yuan to 1.02 billion yuan and 1.39 billion yuan, respectively. Corresponding to the closing price of 28.96 yuan per share on April 23, 2023, PE is 28.49, 20.90, 15.00 times, respectively, maintaining the "overweight" rating.

7. Risk tips:

The demand of special business and communication network is lower than expected; the expansion of server customers is not as expected; the construction of fund-raising projects is not as expected; the capacity climbing is not as expected; the cost of upstream raw materials fluctuates.