Investment suggestion
Skyworth's photovoltaic business developed rapidly in 2021 and 2022, and grew into an important leader of household photovoltaic track. We are optimistic about the certainty of the company's high profits in the photovoltaic business in the context of the downward price of components, and maintain the company's outperforming industry rating by raising the target price by 29% to HK $6.69 based on the 2023 SOTP valuation.
Reason
With the decline in component prices, the company's photovoltaic business profit growth has a strong certainty. 1) according to PV Infolink data, as of January 6, silicon materials, wafers, batteries and components have decreased by 41%, 47%, 40% and 7% respectively from their previous highs. Upstream price reduction to stimulate installation, we believe that in 2023 household photovoltaic enterprise income growth and profitability improvement at least one may exceed expectations, so the certainty of high profit increase is strong. In 2022, Skyworth will give more profits to consumers in the context of rising component prices, and profitability will have more flexibility in the context of falling component prices.
Household channels have invisible barriers, and business model innovation is conducive to quantity. 1) 1~3Q2022 Skyworth Group realized photovoltaic business income of 7.821 billion yuan (year-on-year + 257%) (mainly household income), far exceeding the installation growth rate of household industry, and the company is involved in industrial and commercial photovoltaic business, opening up incremental space for future business. 2) We believe that Skyworth's home appliance management concept gives full play to the channel efficiency and cost control ability in the process of household business promotion. The common management methods of home appliance enterprises-digital management and supply chain management have been fully applied to the development of the market. 3) the superficial threshold of the household industry is low, but the actual test is the comprehensive channel control and product competitiveness of the enterprise, and there are hidden barriers built in the channel. We estimate that the household market CR3 will increase from less than 40% in 2021 to 70% in 2022, and a comprehensive channel layout has a natural first-mover advantage. Skyworth's channel model is vertical management to county and town-level agents, there is no intermediate level, channel efficiency has obvious advantages. 4) at present, the Venture Household Photovoltaic business mainly implements the 22-year operating lease model, which has no debt risk and high acceptance, which is conducive to promotion, and there is no capital turnover pressure in the light asset model.
Home appliance business recovers growth, Skyworth digital growth potential is greater. 1) in 2023, under the background of consumption recovery and gradual elimination of overseas inventory, Skyworth home appliance business is expected to achieve restorative growth, panel prices are low, and the profitability of TV business is relatively high. 2) Skyworth Digital has high growth potential in broadband and VR business, and we are optimistic about Skyworth's efforts in the new category of digital intelligent terminal industry chain.
Profit forecast and valuation
We keep our earnings forecast unchanged from 2022 to 2024, with the current share price corresponding to 6.5x/5.0x2023/2024e pram E. We expect the company's home appliance business to recover in 2023, and we are optimistic about the certainty of high profits in the company's photovoltaic business against the backdrop of downward component prices. based on the 2023 SOTP valuation, the target price will be raised by 29% to HK $6.69, which is 38% higher than the current share price.
Risk.
The decline in component prices is not as expected; the industry competition aggravates the risk; the company's photovoltaic business expansion is not as expected; the panel cost is rising and the risk of chip shortage.