1H23's performance met our expectations
The company announced 1H23 results: 1H23 revenue of 3.29 billion yuan (YoY +21.5%), profit of 390 million yuan (YoY +73.7%), net profit of 240 million yuan (YoY +35.8%); 2Q23 revenue of 1.73 billion yuan (YoY +14.2%), net profit of 230 million yuan (YoY +51.6%), net profit of 140 million yuan (YoY +24.4%), net profit of 140 million yuan (YoY +24.4%), which is in line with our overall expectations.
Development trends
The company's business has blossomed a bit, and the industrial control, new energy vehicle, and home appliance businesses are growing at impressive rates. The company's smart home appliance electronic control/power supply/new energy vehicle and rail transport/industrial control/intelligent equipment business achieved revenue of 14.0/9.7/3.2/2.8/17/140 million yuan respectively during the 1H23 period, an increase of 22.3/9.2/43.8/65.6/20.1/ 3.6%. 1) Industrial control: The company grasps opportunities in construction machinery electrification, wind power, renewable energy and other industries, and its performance growth exceeds expectations; 2) New energy vehicles: The company continues to enrich its customer structure, establish stable cooperative relationships with customers such as BAIC, Nana, and Zero Drive, and continues to expand the commercial vehicle and rail transit market layout. Overall, there are plenty of orders on hand.
3) Electronic control of smart home appliances: The company's smart home appliance electronic control business covered products such as HVAC, heat pumps, and various household appliances. The overseas market represented by India during the 1H23 period had a big impact on the company's performance. 4) Precision connection: The company's products cover FFC, FPC, electromagnetic wires, coaxial wires, etc., and the company has cooperated with a well-known power battery manufacturer. We believe that in the future, as the project continues to be implemented, it is expected to bring new growth points.
5) Power supply: The company's power supply products span a wide range, including optical storage, communication, display, etc. During the reporting period, the company's revenue for photovoltaic inverter component products rose sharply, and the total number of orders also increased sharply, and there were plenty of orders on hand, and batch supply was achieved for household storage, industry and commerce. Furthermore, the company's charging modules also continue to be deployed in overseas markets such as Europe and America. The Japanese OA power supply market is also developing well at the same time, and is progressing smoothly. Overall, we believe that the diversification of the company's business continues to advance steadily, and that the business is orderly and shows the characteristics of progressive gradation. Industrial control, new energy vehicles, etc. have ushered in quite obvious growth, and as projects and orders such as power supplies and precision connections continue to be implemented, we expect to bring new growth points as a whole.
Profitability has improved markedly, and cost control has been stable. The company's gross margin, net interest rate, and non-net interest rate increased by 1.8/2.9/1.9 ppt respectively during the 2Q23 period, and 3.0/3.3/0.7 ppt to 25.9%/13.3%/8.1% year-on-year. Overall, 2Q22-2Q23, with material costs falling, the company's gross margin has also steadily rebounded, and as the quality and efficiency of cost control have improved, the overall net interest rate for deductions has also clearly rebounded. Furthermore, due to the increase in investment income, the company's net interest rate for the 2Q23 single quarter also reached a new high in the past 10 quarters.
Profit forecasting and valuation
We maintain our 2023/24 net profit forecast of 72/970 million yuan. The current stock price corresponds to 2023/24 21.6/16.1x P/E. It maintains an outperforming industry rating and target price of 43 yuan, corresponding to 29.7/22.1x P/E in 2023/24. Compared with the current stock price, there is still room for an increase of 37%.
risks
Industry demand declined, industry competition intensified, gross margin fluctuated beyond expectations, and new business expansion fell short of expectations.