1H23 performance is in line with our expectations
The company announced 1H23 results: 1) 1H23 achieved operating income of 2.455 billion yuan, + 0.4% year-on-year; net profit of 165 million yuan, + 5.5%; and deduction of non-return net profit of 164 million yuan, + 3.0% year-on-year. 2) corresponding 2Q23 income 1.349 billion yuan, year-on-year + 13.4%; net profit 99 million yuan, + 2.9% year-on-year; deducting non-return net profit 110 million yuan, + 14.7% year-on-year. The company's performance is in line with our expectations.
The performance of the vehicle business is outstanding, and the general lighting business is still under pressure. 1) the company's general lighting business is mainly export OEM, with 1H23 revenue of 2.038 billion yuan,-6.1% compared with the same period last year. Affected by the destocking of overseas channels, the overlay company 1H22 shipments have a high base, so the business income of 1H23 is still under pressure. However, as destocking is coming to an end, 1H23 has improved significantly compared with 2H22, and we estimate that 2Q23 outperforms 1Q23 and is expected to improve quarter by quarter in the second half of the year. 2) the revenue of 1H23 vehicle business is 337 million yuan, + 99% compared with the same period last year, which continues to maintain high-speed growth. 1H23 added Wanxiang A123 BMS nearly 400 million yuan designated projects, Marelli LDM and car taillight luminous panel fixed points. Considering the high revenue base of the vehicle business 2H22, we expect that the growth rate of 2H23 revenue may slow down, but the company is still steadily promoting the landing of existing orders and the continuous expansion of customers, as of 1H23, the amount of existing designated projects exceeds 4 billion yuan.
Financial analysis: 1) the company's 2Q23 gross profit margin is from + 2.5ppt to 17.2% compared with the same period last year, benefiting from the relief of raw material cost pressure and product technical reform, and the company's profitability continues to be repaired. 2) since 2023, the company has increased the expansion of overseas customers and participation in exhibitions, but the expense rate during the 2Q23 period is relatively stable and well controlled, and the financial expense rate is slightly higher than the same period last year + 1.4ppt, mainly due to the decrease in foreign exchange earnings compared with the same period last year. Overall, the parent net interest rate of 2Q23 decreased slightly compared with the same period last year, but excluding the exchange rate factor, the non-return net profit margin increased compared with the same period last year. 3) the net cash flow of 1H23's operating activities is 415 million yuan, the cash flow is healthy and the management quality is stable.
Trend of development
2H23 general lighting business is expected to pick up. Overseas destocking is gradually coming to an end. According to the data of the General Administration of Customs, the export value of domestic lamps, lighting fixtures and parts of 3Q22/4Q22/1Q23 / 2Q23 is-9.6% compared with the same period last year, respectively, 15.3%, 2.5%, 2.6% (USD caliber), gradually improved since 2023, and we expect that 2H23's general lighting business is expected to benefit from the recovery of export sales. In terms of vehicle business, the company continues to develop and develop customers in the field of vehicle lighting and vehicle controllers. At present, it has established a good cooperative relationship with Panasonic, Huayu Vision, Wanxiang, etc., and we expect it to continue to contribute in the future.
Profit forecast and valuation
Considering that some of the company's overseas customers are still in the process of destocking, we reduce the net profit of 2023max by 3.4% to 358 million yuan / 437 million yuan in 2024. The current share price corresponds to 2023 17.1x/14.0x Pmax E in 2024. To maintain the outperform industry rating, due to the recent decline in sector valuations, we have lowered our target price by 12.5% to 17.50 yuan, corresponding to 2023 23.3x/19.1x 2024, with 36% upside space.
Risk
Raw material price fluctuation risk; exchange rate fluctuation risk; vehicle business development is not as expected.