Interim report performance: The company achieved revenue of 495 million yuan in H1 in '22, YOY +8.05%; Guimu's net profit was 101 million yuan, YOY -9.16%, after deducting non-net profit of 98 million yuan, YOY-10.00%. Among them, Q2 achieved revenue of 242 million yuan, YOY-6.53%, -4.43% month-on-month; achieved net profit of 58 million yuan, YOY -1.09%, +35.96% month-on-month; the month-on-month decline in revenue was mainly due to the impact of the epidemic and transmission of the downturn in the consumer electronics market. The month-on-month increase in profit was mainly due to technical reform+exchange rate+new pricing model.
MLCC inventory removal pressure spread, and the exchange rate+technical reform+new pricing model Q2 profit boosted significant raw material side month-on-month. As of June 30, 22, Shanghai Nickel fell 34% from a high level. The company adopted a new pricing model in the first half of the year. We believe that the restoration of profitability continued to benefit from the declining trend in nickel prices; on the demand side, the company's Q2 revenue was -6.53% year-on-year, -4.43% month-on-month, mainly due to the impact of the epidemic and the downturn in the consumer electronics market. The downstream MLCC inventory removal cycle is under pressure. We think market demand is expected to reverse in 22Q4 or early next year;
On the cost side, the company's Q2 financial expenses were 11.8 million yuan, -416% year on year and -911% month on month, mainly due to the appreciation of the US dollar exchange rate, with high exports accounting for an advantage;
On the interest rate side, benefiting from technological reform & new pricing models, 22Q2 had a quarterly gross profit margin of 37.40%, +5.31pct over the previous quarter; combined management & financial expenses fell, 22Q2 had a net interest rate of 24.16% in a single quarter, +7.18pct over the previous quarter.
Silver coated copper helped HJT slurry to reduce costs gradually and clearly, and H2 shipments are expected to welcome a new grade PVD milling process to empower the company's high-end powder horizontal expansion, and continue to deploy new products such as silicon powder, alloy powder, and silver coated copper powder based on underlying technology. In terms of silver-coated copper, the company built a new pilot production line for silver-clad copper powder for HJT heterojunction batteries to continue exploring product performance and large-scale cost reduction. H2 is expected to continue to benefit from the trend of localization of low-temperature silver paste; in terms of silicon powder, process optimization improves yield efficiency and actively collaborates with customers to expand energy density and cycle stability paths.
Investment advice: As the leading MLCC nickel powder leader in China, we believe the MLCC industry is expected to reverse, and the company is actively expanding nickel powder production. At the same time, H2 silver-clad copper powder shipments are expected to welcome new levels, and silicon powder actively optimizes production to break through the technological path. Considering the rise in raw materials and the cyclical pressure on the MLCC industry, the company's profit forecast for 22-23 was lowered; considering the pace of expansion of nickel powder production and the amount of copper released in wallets, the company's 24-year profit forecast was raised; it is estimated that the company's net profit returned to the mother in 22-24 was 218/3.48/440 million yuan (previous values were 3.22/377/429 million respectively), corresponding to the current stock price of 75/47/37X, maintaining the “buy” rating.
Risk warning: risk of macroeconomic fluctuations dampening demand, risk of increased industry competition, risk of exchange rate fluctuations, risk of fluctuations in raw material prices, risk of high customer concentration