2022 and 1Q23 performance are slightly lower than we expected

The company announced 2022 and 1Q23 results: 2022 income of 1.48 billion yuan, year-on-year-1.1%; return to the mother net profit of 89.1 million yuan, year-on-year-13.5%; deduction of non-net profit of 73.27 million yuan, + 45.9% year-on-year.

The 1Q23 income is 320 million yuan,-9.3% compared with the same month-to-month ratio of 18.6%; the return to the mother net profit is 5.84 million yuan, and the same month-on-month comparison is-75.9% and 57.2%; deducting the non-net profit-8 million yuan, turning into a loss compared with the same month. Affected by the epidemic disturbance, joint venture brand production and marketing pressure and other factors, the performance of 2022 and 1Q23 is slightly lower than we expected.

Trend of development

The product structure will be optimized and profitability will be improved in 2022. In 2022, the revenue of the engine oil pump business is + 14.7% to 740 million yuan compared with the same period last year, and the gross profit margin is from + 2.8ppt to 11.1%. We estimate that the unit price of the product is + 8.2% to 262 yuan over the same period last year. We believe that it is mainly used for medium and high-end fuel models and hybrid models of variable displacement mechanical oil pump capacity, engine oil pump product structure upgrade, the corresponding ASP and gross profit margin increase. The 2022 gross profit margin (excluding taxes and surcharges) is from + 1.0ppt to 15.2% compared with the same period last year, benefiting from the increase in the proportion of engine oil pump business and the reduction in the price of raw materials due to improved profit margins; the expense rate during the period is from-0.8ppt to 11.2%, mainly affected by exchange earnings of 8.24 million yuan; deducting the non-net interest rate from + 1.5ppt to 4.9%.

1Q23 industry headwind led to a decline in revenue performance, looking forward to the volume of new energy business throughout the year. Referring to the passenger Association, 1Q23 passenger car sales are 21.7% to 5.079 million vehicles compared with-6.8% month-on-month, of which joint venture sales are 18.0% to 2.34 million vehicles compared with-20.6% month-on-month. At present, the company's traditional business is mainly joint venture customers, which is affected to a certain extent in the short term. The company continues to promote new energy business, product end, variable displacement oil pump and electronic oil pump continuous batch production, to thermal management integration module, new energy electric drive layout; client, has obtained BYD hybrid platform camshaft and oil pump project fixed point, get zero run, polar krypton Weirui, Bogwarner and other electronic oil pump fixed point. We believe that the new energy business is expected to expand faster in 2023.

The infiltration of oil-cooled motor drives the rapid release of electronic oil pump, and the company is expected to enjoy the industry dividend. Referring to the data of the NE era, the permeability of domestic oil-cooled motors has reached 33.3% in 2022, and mainstream car companies such as Tesla, Inc., BYD and Geely have all accelerated their adoption. We believe that electronic oil pump, as the power source of oil-cooled motor, is expected to open the market scale with the trend of oil-cooled technology; at the same time, the electronic oil pump industry is in a period of rapid growth and has not yet formed a leader. We are optimistic that the domestic manufacturers represented by Shenglong will quickly expand customer orders and gain market share by virtue of the accumulation of pump technical experience, timely response speed and cost-effective advantages.

Profit forecast and valuation

Taking into account the production and marketing pressure of the joint venture brand, we cut the net profit of 2023 Universe by 13.8% of the net profit of 2024 by 14.7% to 1.26 million yuan. The current share price corresponds to a price-to-earnings ratio of 13.5 times 2023 / 2024 / 18.1 / earnings. Maintain the outperform industry rating, taking into account the company's leading position in the electronic oil pump industry, cut the target price by 7.7% to 12 yuan, corresponding to 22.6 times 2023 price-to-earnings ratio, 24.7% upside from the current stock price.

Risk

Automobile production and sales are not as expected; customer expansion is not as expected; mass production progress of new energy business is not as expected; idle capacity risk of traditional fuel vehicle business.