The company released its 2022 annual report and 2023 quarterly report. 1) According to the annual report, it achieved revenue of 4.10 billion yuan in 2022, +36.2% year on year; net profit of 275 million yuan, +50.8% year on year; net profit of non-return mother was 255 million yuan, +90.6% year on year. Among them, Q4 2022 achieved revenue of 1.20 billion yuan, +36.6% year on year, +6.73% month on month; net profit of returned mother was 113 million yuan, +496% year on year, +34.4% month on month; net profit after deducting non-return mother's net profit was 92 million yuan, +1,168% year on year, +21.8% month on month. The performance was in line with market expectations. 2) According to the first quarter report of 2023, Q1 achieved revenue of 1.01 billion yuan, +41.9% year on year, -15.4% month on month; net profit of returned mother was 95 million yuan, +3,017% year on year, -15.6% month on month; net profit of non-return mother was 75 million yuan, +143,662% year on year, and -18.5% year on month, achieving rapid year-on-year growth. The company lays out industrial automation, network energy, new energy vehicles, photovoltaic energy storage, etc. The market share of products in different fields such as low voltage inverters, modular UPS, and electronic control of new energy commercial vehicles is among the highest in the industry. The industrial automation and network energy business is developing steadily, building a basic market. Growth businesses such as electronic control and optical storage inverters for new energy vehicles are expected to fully benefit from the high level of prosperity in the industry and build a second growth curve. Revenue share continues to increase, and profitability continues to increase.
The company's technical advantages are obvious. Cost reduction goes hand in hand with market development, and is expected to usher in rapid development. Maintain the company's target market value of 11.4 billion yuan, corresponding to the target price of 15 yuan/share, and maintain the “buy” rating.
Matters: The company released its 2022 annual report and 2023 quarterly report on April 17. Our comments on this are as follows:
The 2022Q4 performance was in line with expectations, and the fee rate was greatly optimized year over year. According to the company's annual report, revenue was 4.10 billion yuan in 2022, +36.2% year on year; net profit of returned mother was 275 million yuan, +50.8% year on year; net profit of non-return mother was 255 million yuan, +90.6% year on year. Among them, Q4 2022 achieved revenue of 1.20 billion yuan, +36.6% year on year, +6.73% month on month; net profit of returned mother was 113 million yuan, +496% year on year, +34.4% month on month; net profit after deducting non-return mother's net profit was 92 million yuan, +1,168% year on year, +21.8% month on month. The performance was in line with market expectations. The company's overall gross profit margin in 2022 was 30.1%, -2.59 pcts year on year. Among them, the company's gross margin in Q4 2022 was 29.7%, -0.49 pct year-on-year, -1.58pcts month-on-month, and the expense ratio for the period was 22.9%, -7.32pcts year-on-year, and +1.41pcts month-on-month. Among them: sales expense ratio was 9.41%, year-on-year -1.39 pcts, +0.82 pct month-on-month; management expense ratio was 4.84%, year-on-year -1.20 pcts, +0.58pct; R&D expense ratio was 7.67%, -5.05 pcts yoy, -2.28pcts month-on-month; financial expense ratio was 0.96% year-on-year, +0.33pct, +2.29pcts month-on-month. The rate during the period dropped sharply year over year and increased slightly from month to month, due to the company's continuous optimization of management and operation.
2023Q1 achieved net profit of 75 million yuan after deducting non-return to the mother, a sharp improvement in profit over the previous year. According to the company's 2023 quarterly report, Q1 of 2023 achieved revenue of 1.01 billion yuan, +41.9% year on year, -15.4% month on month; net profit of 95 million yuan, +3,017% year on year, -15.6% month on month; net profit after deducting non-return to the mother was 75 million yuan, +143,662% year on year, and -18.5% month-on-month, all of which were the average of performance forecasts. In line with expectations, profitability improved dramatically in the first quarter, mainly due to the company's active expansion of marketing channels, continuous optimization of internal management, and steady growth in revenue in various business sectors at the same time The company's gross margin increased year-on-year under the positive influence of scale effects, material prices, etc. The company's gross margin for the first quarter of 2023 was 31.1%, +2.61 pcts year on year, +1.44 pcts month on month. The cost rate for the period was 23.8%, -5.47 pcts year on year, +0.95pct month on month. Among them: the sales expense ratio was 8.86%, -1.20 pcts year on year, -0.55pct on month; the management expense rate was 5.17%, year on year -1.57 pcts, +0.33pct on month; the R&D expense ratio was 9.16%, -2.63 pcts year on year, +1.48 pcts month on month; financial expense ratio was 0.64%, year-on-year -0.06pct, -0.32pct month-on-month. During the period, rates dropped sharply year on year, and increased slightly from month to month. We think the company's rate management and control worked well, and there is still room for decline in the future.
The company's traditional business is growing steadily, and the new energy business is growing at an accelerated pace. According to the company's 2022 annual report and 2023 quarterly report, 1) Traditional business: In 2022, the company's industrial automation and network energy business achieved revenue of 2.30 billion yuan/729 million yuan, +11.8%/+28.8% of total revenue, respectively, accounting for 56.1%/17.8% of total revenue, year-on-year -12.2pcts/-1.01pcts, and Q1 2023 industrial automation and network energy business achieved revenue of 559 million yuan/169 million yuan compared to the same period last year, accounting for +29.0%/+20.8% of total revenue respectively, accounting for total revenue At 55.2%/16.7%, traditional businesses achieved steady growth, and the growth rate was higher than the industry average. 2) Photovoltaic energy storage business: The company's photovoltaic energy storage business achieved revenue of 271 million yuan/115 million yuan respectively in 2022 and the first quarter of 2023, +207%/291%, accounting for 6.61%/11.4% of total revenue, up to +3.67 pcts/+7.26 pcts over the previous year. The photovoltaic energy storage business achieved explosive growth. The gross margin in 2022 was 17.4%, the year-on-year rate of +19.1 pcts, and profits were drastically restored. 3) New energy vehicle business: The company's new energy vehicle business in 2022 and Q1 of 2023 achieved revenue of 607 million yuan/124 million yuan respectively, +117%/+29.9% year on year, accounting for 14.8%/12.2% of revenue. Of these, revenue in 2022 was +5.51 pcts year on year, achieving a significant increase. The gross profit margin in 2022 was 23.0%, +3.29pcts year on year, and profitability increased. At the same time, according to the response to the Shenzhen Stock Exchange's letter of concern issued by the company on April 17, 2023, the company expects NEV business subsidiaries to achieve revenue of 1.20 billion yuan/1.90 billion yuan/3.0 billion yuan in 2023/24/25, an increase of 93%/58%/58% over the previous year.
The Suzhou Phase III project is advancing at an accelerated pace to help increase the production capacity of traditional businesses. The company announced on February 21, 2023, that its wholly-owned subsidiary Suzhou Inweiteng signed a strategic cooperation letter of intent with the Suzhou Science and Technology City Management Committee to invest in the construction of the Inweiteng Suzhou Industrial Park Phase III project in Suzhou Science and Technology City, with a total investment of 1.05 billion yuan to build intelligent plants to further promote R&D, production and sales of the company's industrial automation and energy and power business. At the same time, the company announced on April 17, 2023, that it intends to increase capital to Suzhou Inweiteng by 300 million yuan to advance the construction of the Suzhou Industrial Park Phase III project, we think, along with the Suzhou Industrial Park Phase III project Construction is advancing at an accelerated pace, the production capacity of the company's traditional business is expected to grow further, and revenue and profitability will continue to increase.
The NEV business reversed losses after equity incentive fees were added back in 2022. The company's new energy vehicle business is mainly operated by the subsidiary Shenzhen Yingweiteng Electric Vehicle Drive Technology Co., Ltd. (later referred to as Drive Company). In 2020/2021/2022, driving the company's revenue was 156 million yuan/265 million yuan/610 million yuan respectively, and net profit of -68 million yuan/-30 million yuan/-18 million yuan. Losses have narrowed year by year. Considering that driving the company's equity incentive expenses in 2022 are about 42 million yuan. If it is added back, the net profit will be 24 million yuan, indicating that the company's new energy was successfully reversed, indicating that the company's new energy was successfully reversed. The profitability of the automobile business continues to increase. We expect that with the rapid development of the company's industry, the profitability of the company's NEV business will increase dramatically, and full loss reversal is expected in 2023.
Risk factors: The electrification process of commercial vehicles fell short of expectations; the risk of price increases for upstream raw materials; the risk that the overseas situation and policies would change beyond expectations; the increase in the company's product market share fell short of expectations; the company's market expansion progress fell short of expectations; and the release of production capacity fell short of expectations.
Investment suggestions: The company continued to optimize internal management, open up market space, and built a second growth curve for the new energy business based on the industrial control business. It maintained the company's 2023/24 net profit forecast of 429/526 million yuan respectively, and the forecast for additional net profit to the mother for 2025 was 672 million yuan. The corresponding EPS forecast was 0.54/0.66/0.85 yuan/share, respectively. The current price corresponding to PE for 2023/24/25 was 23/19/15 times, respectively. The company lays out industrial automation, network energy, new energy vehicles, photovoltaic energy storage, etc. The market share of products in different fields such as low voltage inverters, modular UPS, and electronic control of new energy commercial vehicles is among the highest in the industry. The industrial automation and network energy business is developing steadily, building a basic market. Growth businesses such as electronic control and optical storage inverters for new energy vehicles are expected to fully benefit from the high level of prosperity in the industry and build a second growth curve. Revenue share continues to increase, and profitability continues to increase. The company's technical advantages are obvious. Cost reduction goes hand in hand with market development, and is expected to usher in rapid development. Based on the segmented valuation method, referring to the valuation situation of the company's industrial control business, such as Huichuan Technology, Megmeet, Xinjie Electric, and Raytheon Intelligence, the average in 2023 was about 23xPE (based on Wind's consistent expectations), giving the company's industrial control business 23xPE valuation in 2023; referring to the new energy business comparison with the valuation of companies such as Imbor and Juyi Technology, the average in 2023 was about 1xPS (based on Wind's consistent expectations), giving the company a 1XPS valuation in 2023 (based on Wind's consistent expectations), maintaining the company's target market value of 11.4 billion yuan Corresponding to the target price of 15 yuan/share, maintain the “buy” rating.