1Q22 performance meets performance forecast
The company announced 1Q22 results: revenue of 1.055 billion yuan, an increase of 44.7% over the same period last year, and net profit of 84.92 million yuan, an increase of 1787.7% over the same period last year, falling into the range of 70 million yuan to 95 million yuan previously forecast. The substantial increase in the company's net profit is mainly due to: 1) the increase in the income contribution of North American consumer electronics and North American new energy vehicles; 2) the low base of 1Q21.
Trend of development
1Q22 off-season is not weak, the performance of consumer electronics customers in North America is outstanding, and the proportion of cars continues to rise. 1Q22's revenue is up 44.7% year-on-year, and we expect it to be mainly due to year-on-year growth in consumer electronics customer revenue in North America, which we expect to account for 30%. However, considering the low demand in the mobile phone market in the first quarter, Android customers may continue to be under pressure. In addition, the company said that the revenue share of the new energy vehicle business is increasing, and we expect North American new energy vehicle customers to contribute considerable performance increments. In terms of gross margin, 1Q22 gross margin increased 1.1ppt/5.4ppt year-on-year / month-on-month respectively, and we expect a decline in Android revenue with low gross margin and an increase in new energy vehicle business with high gross margin.
Reduce cost and increase efficiency to control the rate of expenses, and operating cash flow continues to improve. All the expense rates of 1Q22 company have declined, among which the sales rate / management rate respectively decreased 0.5ppt/1.5ppt compared with the same period last year, reflecting the company's achievement of reducing cost and increasing efficiency. R & D rates fell 2.1ppt compared with the same period last year, but the absolute value of R & D expenses increased 9.7% year-on-year to 69.65 million yuan. In addition, considering the impact of the recent epidemic, the company carried out strategic stock of raw materials, corresponding to an increase of 55.2% to 21.25 million yuan in advance over the same period last year, and inventory increased by 12.7% to 614 million yuan over the same period last year. In terms of cash flow, the net cash flow of 1Q22 operating activities improved significantly to 115 million yuan compared with the same period last year (38.17 million yuan for 1Q21), mainly due to the continuous growth of company revenue and the increase in customer payments.
Pay attention to the follow-up impact of the epidemic, and be optimistic about the growth of consumer electronics plus automobile business throughout the year. Looking forward to the second quarter, considering that there is still uncertainty about the impact of the epidemic on logistics production in the Yangtze River Delta, we suggest that we should pay attention to the impact of the epidemic on supply and demand in the second quarter. However, from the annual perspective, we are optimistic about the performance increment of the company's consumer electronics business as North American major customers enter the pull cycle in the second half of the year, as well as the growth space of new energy vehicle business with the increase of major customer shipments.
Profit forecast and valuation
Considering that the impact of the current epidemic is still uncertain, we keep our profit forecasts for 2022 and 2023 unchanged. The current share price corresponds to a price-to-earnings ratio of 21.7 / 17.6 times 2023. Maintain an outperform industry rating and a target price of 18.00 yuan, corresponding to 33.3 times 2022 price-to-earnings ratio and 27.0 times 2023 price-to-earnings ratio, which has 53.1% upward space compared with the current stock price.
Risk.
The impact of the epidemic exceeded expectations; shipments of new energy vehicles in North America fell short of expectations; and Weibo continued to lose money.