1H23 BOE precision power revenue and return net profit are lower than expected: total income HK $5.21 billion, year-on-year + 8% / month-on-month-12%; return mother net profit HK $203 million, down 19% from the same period last year. Revenue / return net profit was lower than Bloomberg's consensus forecast.
We believe that the main factors are: (1) overseas revenue is only basically flat compared with the same period last year; (2) the negative impact on profits caused by the price reduction of domestic vehicle manufacturers is higher than expected. 1H23's net interest rate is 3.9%, down from 5.4% in 22 years.
We believe that with the growth rate of Chengdu module factory rising, the subsequent net profit margin shows a slow repair trend, and we expect the company to have an annual net profit rate of 4.4%, 5.0, 5.7% in 23-24-25. We correspond to a reduction of 23qqqq25e homing net profit of HKD1.01 billion respectively. 2023 20X PE (comparable company average 36x, taking into account 23 years of pressure to give a 45% discount), target price of HK $13.14, maintain "buy".
1H23 revenue is + 8% year-on-year, and net profit due to price adjustment and factory construction is year-on-year-19%1H23 's total revenue is HK $5.21 billion, + 8% year-on-year, of which domestic income accounts for 71%. Q2 domestic vehicle demand is sluggish and overseas fixed-point conversion cycle has not yet arrived, resulting in a rapid slowdown in income growth. The company's 1H23 homing net profit fell 19% year-on-year, mainly due to: (1) 1H23 raw materials and consumables accounted for 89.3% of revenue, year-on-year / month-on-month growth of 1.7/3.4pct, downstream vehicle factory price reduction brought inventory adjustment pressure. (2) under the influence of the new recruits in the delivery room (7022 employees at the end of 1H23, 1291 more than at the end of 2H22), the ratio of staff costs to revenue quickly rose to 7.7%, which is higher than that of 2H22.
1H23's overall net profit margin was 3.9%, a year-on-month decline of 1.3/1.7pct, and the company said that excluding price cuts and module factory effects, the overall net profit margin was similar to that in 2022 (5.4%).
Downstream demand month-on-month improvement, optimistic about the profit recovery trend after 2H23 2H23 and 2024, downstream vehicle terminal demand shows a marginal warming trend, cockpit intelligent off-load screen track still has good growth, the company is expected to benefit from LTPS&OLED, large-size screen upgrades, as well as the interpretation of new products such as back-row entertainment, CMS, HUD, etc. At the same time, the farming rate of Chengdu module factory continues to increase, and the negative impact of the construction of new factories on the profit side is expected to be gradually improved. However, we can see that at a time of fierce competition among car companies, subsequent price cuts may still have an impact on the company to a certain extent. We downgrade the 23-year ASP growth rate of the vehicle display module to-9% (the original value is 0%). We forecast that the annual net interest rate on 23-24-25 will be 4.4 pound 5.0 pounds 5.7% (2022 net interest rate 5.4%).
Based on 20x PE valuation, the target price is HK $13.14 and the "buy" is maintained.
In the long run, the company's future overseas fixed-point release is expected to bring a pick-up in performance growth, as well as an increase in the share of system-level business is expected to drive the valuation center upward. However, considering that the 23-year overall revenue and profit-end growth of the short-term company are under pressure, and the ASP improvement is lower than expected, we reduce 23-year income / return net profit by 721% to HK $11.96 billion, give 23-year 20X PE (comparable company 2023E PE average 36 times), and maintain the target price of HK $13.14 (previous value of HK $18.70).
Risk hint: cockpit intelligent infiltration is slow, the progress of net profit repair is not as expected.