The company released a report for the third quarter of 2022: the first three quarters of 2022 achieved operating income of 9.602 billion yuan, an increase of 3.07% over the previous year; realized net profit of 264 million yuan, an increase of 1.02% over the previous year; and achieved net profit of 246 million yuan after deducting non-return mother's net profit, an increase of 4.41% over the previous year. Among them, Q3 2022 achieved operating income of 3.402 billion yuan, a decrease of 7.38% and 2.02% respectively; realized net profit of 90 million yuan, a decrease of 6.33% and 9.02%, respectively, and net profit of non-return to the mother was 83 million yuan, a decrease of 5.74% and 13.46% respectively from the same period last month.
Performance declined slightly due to macro-environment disturbances. The company's revenue and profit declined in Q3 2022 compared to the same period. We speculate that it was mainly due to a slight weakness in the external macro environment and increased competition in the company's main cable business. The company's gross margin for Q3 2022 was 10.50%, down 1.39 pct year on year and 3.14 pct month on month; net interest rate was 2.66%, down 0.20 pct year on year and 1.55 pct month on month. The sales, management, R&D, and financial expenses rates were 2.23%, 1.39%, 3.61%, and 0.19%, respectively. The year-on-year changes were +0.20%, +0.20%, -0.26%, and -0.36%, respectively, and -1.83%, -0.40%, +0.30%, and -0.04%, respectively.
The production capacity of flat solenoid wires for new energy vehicle drive motors is expanding rapidly, and the 800V project is poised to start. The company began expanding the production capacity of special solenoid wires for new energy vehicle motors in 2021. The first phase of production capacity of 7,000 tons/year has been successfully achieved; the main plant of the second phase has been completed, the supporting high-speed extruder and imported finishing equipment have been put into use, and 12,000 tons of copper rod equipment have been installed.
Currently, the company is carrying out intensive construction of various auxiliary equipment and facilities. The second phase is expected to be put into operation by the end of the year. At that time, the total production capacity of phase 1 and 2 will reach 2-25,000 tons/year. At the same time, the company is currently stepping up the prototyping of electromagnetic wire products for 800V high-voltage platforms, with more than 20 projects in the pipeline.
With the expansion of the company's production capacity, the increase in the penetration rate of flat wire motors, and the launch of the 800V platform, the company's special solenoid wire business for new energy vehicle motors is expected to grow rapidly. We are optimistic about the company's performance in Q4 and next year.
[Investment advice]
The company is a leading domestic magnet wire company. Driven by strong downstream demand, it will drive the company's flat magnet wire business to grow rapidly. We expect the company's revenue for 2022-2024 to be 138,43/154.60/18.448 billion yuan respectively, net profit of 374/46/ 572 million yuan respectively, corresponding PE is 12.49/10.13/8.16 times respectively, and corresponding EPS is 0.51/0.63/0.78 yuan/share, respectively, covering the “increase in holdings” rating for the first time.
[Risk Reminder]
The penetration rate of flat line motors falls short of expectations;
Capacity expansion fell short of expectations;
Risk of fluctuations in raw material prices.