The company released its 2022 annual report: revenue was 2,502 million yuan, an increase of 4.12% over the previous year; Guimu's net profit was 805 million yuan, down 2.68% from the previous year; after deduction, the net profit of Guimu was 784 million yuan, a decrease of 3.45% over the previous year.

The in-house production business has been steadily rising, and revenue from other electronic components has increased dramatically. In 2022, the company's self-produced business achieved revenue of 1,373 million yuan, an increase of 1.89% over the previous year, and a gross profit margin of 80.91%, an increase of 0.08 pct over the previous year; of these, porcelain dielectric capacitor products achieved revenue of 1,293 billion yuan, a year-on-year decrease of 3.31 pct; DC filter products achieved revenue of 21.5597 million yuan, an increase of 8.90% over the previous year, accounting for 1.57% of the self-produced business, an increase of 0.10pct over the previous year; other electronic components It achieved revenue of 58.0469 million yuan, an increase of 324.86% over the previous year, accounting for 4.23% of the self-produced business, an increase of 3.21 pct over the previous year. The agency business achieved sales revenue of 1,104 billion yuan, a year-on-year increase of 5.80%, and a gross profit margin of 10.78%, a year-on-year decrease of 2.36 pct.

With the establishment of a new wholly-owned subsidiary, Suzhou Hongyuan's revenue performance increased dramatically. In 2022, the company established a new wholly-owned subsidiary, Hongyuan Hefei. Its main business is the manufacture of electronic components; R&D, production and sales of special electronic materials, metal-based composites, ceramic-based composites, and special ceramic products. In 2022, the revenue of the company's holding subsidiaries Hongyuan Suzhou, Honglixin and Hongqixing increased significantly year-on-year, achieving revenue of 239 million yuan, 455.066 million yuan, and 116.8856 million yuan respectively, up 73.28%, 300.94%, and 389.16%, respectively; in 2022, Hongyuan Suzhou achieved net profit of 34264 million yuan, a sharp increase of 396.7% over the previous year.

The cost rate increased during the period, and investment in R&D continued to increase. The company's overall gross margin in 2022 was 50.15%, down 1.36pct from the previous year; the net interest rate was 32.16%, down 2.25pct from the previous year; the weighted average ROE was 21.98%, down 6.19pct from the previous year. The company's total period expenses were 282 million yuan, an increase of 9.22% over the previous year, the share of revenue was 11.28%, and the share of revenue increased by 0.53 pct; of these, sales expenses were 76 million yuan, an increase of 9.03% over the previous year, accounting for 3.04% of operating income, an increase of 0.14pct over the previous year; management expenses were 102 million yuan, an increase of 3.32% over the previous year, accounting for 4.09% of operating income, a decrease of 0.03 pct of revenue over the previous year; the company's financial expenses were 5.112 million yuan, a decrease of 3.826 million yuan over the previous year; the company's financial expenses were 5.112 million yuan, a decrease of 3.826 million yuan over the previous year; the company's share of revenue was 5.1124 million yuan, a decrease of 3.826 million yuan over the previous year; the company's share of revenue was 5.1124 million yuan, a decrease of 3.826 million yuan over the previous year; the company's share of revenue Continuously increasing investment and effort in scientific and technological innovation, R&D expenses were 99 million yuan, an increase of 22.39% over the previous year, accounting for 3.94% of operating income and an increase of 0.59 pct over the previous year.

Net cash flow from operating activities declined, and inventories increased significantly year over year. Net cash flow from the company's operating activities was 357 million yuan, a year-on-year decrease of 32.91%; net cash flow from investment activities was -266 million yuan, compared with -345 million yuan in the same period last year, an increase of 79 million yuan over the previous year; net cash flow from fund-raising activities was 97 million yuan, an increase of 19.64% over the previous year. By the end of 2022, the company's receivables totaled 2,227 million yuan, an increase of 16.71% over the previous year, of which accounts receivable were 1,347 million yuan, an increase of 26.60%; the accounts receivable turnover ratio was 2.08 million yuan, a decrease of 0.38 over the previous year; the company's inventory was 672 million yuan, an increase of 61.95% over the previous year, and the inventory turnover rate was 2.27 times, a decrease of 1.36 times over the previous year; the company's contract liabilities were 3,2277 million yuan, down 18.29% from the beginning of the year, down 18.29% from the end of the third quarter, down 18.29% from the end of the third quarter 13.54%

The sales ratio of the top five customers in the self-production business is basically stable. In 2022, the top five customers of the company's self-produced business achieved a total sales revenue of 9644.781 million yuan, accounting for 70.24% of the current self-produced business revenue, which is basically the same as the same period last year; the top five agency business customers achieved total sales revenue of 725.2312 million yuan, accounting for 65.69% of agency business revenue.

The cash dividend ratio is less than 30%, and undistributed profits will be invested heavily in the company's development. The total amount of capital paid by the company to buy back the company's shares through centralized bidding transactions in 2022 was 53.4896 million yuan, which is considered a cash dividend; the cash dividend to be distributed in 2022 was 857.051 million yuan, that is, the total amount of the company's cash dividend in 2022 was 139 million yuan, accounting for 17.30% of the company's net profit attributable to shareholders of listed companies in 2022.

We adjusted our profit forecast based on the latest financial reports. The company's net profit for 2023-2025 is estimated to be 890/10.00/1,150 billion yuan respectively, and EPS is 3.83/4.30/4.95 yuan/share respectively. Corresponding to the closing price of PE on March 17 was 21.8/19.4/16.9 times, maintaining the “increase in holdings” rating.

Risk warning: declining gross margin; product delivery falling short of expectations; revenue recognition progress lags behind.