Core views:
Huagong Technology released its 23rd annual report. In the first half of '23, the company achieved operating income of 5.024 billion yuan, a year-on-year decrease of 19.20%, and net profit attributable to the parent company was 582 million yuan, an increase of 3.28% over the previous year. Among them, 23Q2 achieved operating income of 2,359 million yuan, a year-on-year decrease of 29.79%; net profit of Gimu was 274 million yuan, a year-on-year decrease of 18.86%.
Laser cutting equipment has expanded overseas markets, and the proportion of high-end products has increased. According to the company's semi-annual report, 23H1's intelligent manufacturing business revenue was 1,473 million yuan, down 9.53% year on year; gross profit margin was 37.18%, up 5.64 pct year on year. Sales of high-end products such as laser cutting intelligent equipment in overseas markets increased 35% year on year; in addition, the business revenue of the company's intelligent equipment business group increased 20% year on year, and net profit increased 50% year on year.
The connectivity business is affected by the base station construction cycle, and the optical module is progressing smoothly. In the first half of '23, optoelectronic device revenue was 1,837 billion yuan, down 43.74% from the previous year. According to the semi-annual report, mainly due to the 5G construction cycle, the scale of network terminal business delivery was reduced; the gross profit margin was 9.70%, an increase of 1.25 pct over the previous year. The company delivered a full range of optical modules of 400G and below in batches, and entered many leading Internet vendors at home and abroad.
The sensor business has grown dramatically, and shipments of new energy PCT heaters have doubled. 23H1's sensor business revenue was 1,461 million yuan, up 45.31% year on year; gross profit margin was 23.17%, up 1.97 pct year on year. In the first half of the year, the sales scale of the new energy and intelligent connected vehicle market increased 76% year-on-year. Among them, shipments of PTC heaters for new energy vehicles increased by 107% year-on-year.
Profit forecast and investment suggestions: Huagong Technology's net profit for 23-25 is estimated to be 1,094/13.09/1,547 billion yuan, respectively. Considering the company's leading position in various industries, and the market share ranking of optical modules is increasing year by year, Huagong Technology was given a PE valuation 40 times the net profit of 23 years, corresponding to a reasonable value of 43.52 yuan/share, and a “buy” rating.
Risk warning: 5G base station and data center construction fell short of expectations; competition in the optical module market intensified; penetration rate of new energy vehicles fell short of expectations; PTC heater routes were replaced by heat pump routes.