Event: the company released its mid-2023 report on August 18. 1H23 achieved 887 million yuan in revenue, YoY+0.2%; returned to its parent net profit of 190 million yuan, YoY+ 2.8%, and deducted non-net profit of 176 million yuan, YoY-2.9%.
The performance is in line with market expectations. Our comprehensive comments are as follows:
Affected by the pace of demand, the growth of 2Q23 slows down; the profitability of 1H23 increases. 1) looking at a single quarter: 1Q23, the company's revenue and net profit reached a record high in a single quarter, making a good start to the performance. 2Q23 realized revenue of 390 million yuan, YoY-6.0%; net profit of 77 million yuan, YoY-22.0%; deduction of non-net profit of 64 million yuan, YoY-33.0%. Affected by the pace of downstream demand, the company's 2Q23 growth slowed down. With the recovery of downstream demand and the release of production capacity, the company is expected to return to high growth in the second half of the year. 2) profitability:
1H23 gross profit margin increased 1.2ppt to 50.1% year-on-year; net profit margin increased 0.03ppt to 21.2% year-on-year.
2Q23 gross margin fell 1.9ppt to 51.2% year on year; net profit margin fell 3.4ppt to 20.6% year on year.
Steady growth of special power supply; improvement of profitability of customized power supply. 1H23, according to the products: 1) the revenue of module power supply is 380 million yuan, YoY-2.2%, accounting for 42% of the total revenue, and the gross profit margin fell 2.58ppt to 56.0% from the same period last year. 2) the revenue of custom power supply is 260 million yuan, YoY + 15.2%, accounting for 30% of the total revenue, and the gross profit margin increased 2.72ppt to 60.1% compared with the same period last year. 3) the revenue of high-power power supply and system is 180 million yuan, YoY-13.7%, accounting for 21% of the total revenue, and the gross profit margin fell 5.94ppt to 18.4% compared with the same period last year. From the perspective of different industries: 1) the revenue of aviation, aerospace, shipping and other special areas is 590 million yuan, YoY + 13.6%, accounting for 66% of the total revenue, and the gross profit margin fell 2.73ppt to 62.1% from the same period last year. 2) the revenue of communications and network sector is 280 million yuan, YoY-18.2%, accounting for 31% of the total revenue, and the gross profit margin increased by 1.32ppt to 26.9% compared with the same period last year. Subsidiary perspective: 1) Shenzhen Leineng: revenue fell 19.5% year-on-year to 274 million yuan; net profit dropped 16.4% year-on-year to 42 million yuan; 2) Wuhan Yongli:
Revenue fell 11.5% year-on-year to 106 million yuan, net profit was-3 million yuan, 1H22 was 7 million yuan.
Continue to increase investment in R & D to cast core barriers; special areas of rebate affect cash flow. The expenditure rate during the 1H23 period increased by 3.3ppt to 26.2% compared with the same period last year, of which the R & D expenditure rate increased by 3.7ppt to 17.1% compared with the same period last year; and R & D expenses increased by 27.8% to 152 million yuan. By the end of 2Q23, the company: 1) accounts receivable and bills were 1.375 billion yuan, 5.8% more than at the end of 1Q23; 2) the prepaid amount was 19 million yuan, which was 61.2% lower than that at the end of 1Q23; 3) the inventory was 999 million yuan, an increase of 2.7% over the end of 1Q23; 4) the contract liability was 6 million yuan, 42.4% lower than at the end of 1Q23. The net cash flow of 1H23 operating activities is-180 million yuan and 1H22 is-70 million yuan. The increase in the proportion of income in special areas and the longer payback cycle lead to a decrease in cash inflows; at the same time, the increase in R & D personnel year-on-year increases the salary expenditure of employees.
Investment suggestion: the company is China's special power leader, aerospace and other special areas of rapid development, domestic and foreign communications, server power supply and other strong demand, the company's market share continues to increase. With the advance of the medium-term adjustment, orders may gradually fall to the ground, and performance is expected to return to high growth. Considering the pace of demand, we slightly adjust the company's profit forecast. It is estimated that the company's net profit in 2023-2025 is 420 million yuan, 680 million yuan and 1 billion yuan respectively, and the current stock price corresponds to 24x/15x/10x in 2023-2025 PE. Maintain the recommended rating.
Risk hint: the progress of the fund-raising project is not as expected, and the progress of new product development is not as expected.