This report is read as follows:
Affected by downstream demand, the company's 2022Q3 performance is lower than expected, with the recovery of demand and the volume of car lights, Mini-LED business, the company will pick up growth.
Main points of investment:
Maintain the holding increase rating. Due to the influence of downstream demand, we downgrade the company's EPS forecast for 2022-2024 to 0.28,0.29,0.49,0.31 / 0.71 (- 0.31) yuan. Taking into account the average valuation level of the industry and the valuation premium of VR and automotive business, we give the company 25 times PE in 2023 and lower the target price to 12.25 (- 2.00) yuan.
The performance was lower than expected. The company achieved revenue of 2.705 billion yuan in the first three quarters of 2022,-11.66% of the same period last year, and net profit of 148 million yuan,-31.65% of the same period last year. 22Q3 achieved revenue of 906 million yuan in a single quarter,-14.32% year-on-year and-5.82% month-on-month, and its net profit was 49 million yuan,-35.31% year-on-year and + 6.52% month-on-month. The decline in performance was mainly due to the decline in market demand at home and abroad, but the company alleviated the increase in operating costs caused by insufficient production rate by reducing costs and increasing production efficiency, so that the gross profit margin of 22Q3 was close to that of the same period last year, reaching 21.18%, with a month-on-month increase in 1.78pcts.
Traditional business needs to be repaired, while emerging business opens up a second growth curve. Traditional LED packaging is currently affected by insufficient demand, and if the industry needs to repair in the future, the company's main business is expected to usher in a greater degree of repair. In emerging areas, due to the impact of terminal demand, Mini-LED demand is under some pressure in the short term, resulting in a decline in the company's capacity utilization, but the growth of VR shipments and the increase of Mini-LED penetration in the TV field will release the company's growth space. At the same time, the company's headlight business is progressing smoothly, and Nahan Automobile, which is a shareholder, has also begun to provide the company with revenue increment, and emerging areas will become a major source of power for the company's growth.
Catalyst. Mini-LED penetration increases; VR products are introduced to new customers.
Risk hint. The release of production capacity is less than expected; market competition intensifies.
