2022 and 1Q23 results are in line with market expectations

The company announced 2022 and 1Q23 results: revenue of 738 million yuan in 2022, an increase of 17% over the previous year; net profit of the mother was 166 million yuan, after deducting net profit of the non-return mother - 185 million yuan. 1Q23 achieved operating income of 48 million yuan, a decrease of 50% over the previous year, net profit of 39 million yuan, net profit of the non-return mother - 43 million yuan. The performance was in line with expectations.

Development trends

In 2022, 4,782 vehicles were insured, and the number of heavy trucks was released rapidly. According to Jiaotong Insurance data, the number of fuel cell vehicles sold in China reached 1,237 in December 2022. Among them, Henan continued the November sales trend, with sales reaching 285 vehicles in December. Guangdong, Hebei, Hubei, and Shanxi all sold more than 100 vehicles, and many provinces and cities ushered in sales at the end of the year. The number of fuel cell vehicles insured in 2022 reached 4782, an increase of 155% over the previous year. Looking at vehicle types, according to Jiaotong Insurance data, 2,458 fuel cell heavy trucks were sold in 2022, accounting for 51%, up ppt from 2021. We believe that fuel cells have a natural advantage in the field of heavy trucks, and they are expected to spread further in volume in the future.

The fuel cell market accounts for the highest share of the industry, and the rapid decline in product prices affects revenue growth. In 2022, the company sold 1,537 fuel cell systems, an increase of 183% over the previous year. According to Jiaotong Insurance data, the company's fuel cell installed capacity in 2022 was 104 MW, accounting for about 22% of the industry market, ranking first in the industry. Currently, fuel cell costs and sales prices are still in a rapid downward stage. We estimate that the average sales price of the company's fuel cell systems in 2022 was 4,238 yuan/kw, down 52% from 2021. The sharp decline in product prices affected the company's revenue growth rate, but on the other hand, the accelerated decline in cost prices will help accelerate the parity of terminal applications, and space is expected to open up further.

The cost rate of falling sales revenue has increased dramatically, and profitability has remained stable. The company's 1Q23 sales/management/R&D expenses ratio was 25.4%/122.4%/48.1%, respectively. The month-on-month changes were +8.7ppt/+102.1ppt/+43.7ppt respectively. The cost rate increased mainly due to a sharp seasonal decline in sales revenue. In terms of profitability, the company's gross profit margin for 1Q23 sales was 34.9%, a slight decrease of 0.4ppt from the previous month. Due to the small scale of total revenue and high expense ratio, net profit remained at a loss.

Profit forecasting and valuation

Due to the rapid decline in fuel cell system prices, we lowered the company's 2023 revenue forecast by 23% to 1.11 billion yuan, introduced 2024 revenue of 1,915 million yuan, and at the same time lowered the 2023 net profit forecast of -269% to -165 million yuan, and introduced the 2024 net profit forecast of -66 million yuan. The current stock price corresponds to 8.5x/5.0x P/S in 2023/2024. Since the fuel cell industry is still developing rapidly, we maintain outperform the industry rating and target price of 100 yuan, corresponding to 10.6x/6.2x P/S in 2023/2024, which has 24.6% room for improvement from the current stock price.

risks

Hydrogen energy policies in various regions fell short of expectations, sales of fuel cell vehicles fell short of expectations, and industry competition intensified and profitability declined.