Key points of investment
Incidents: The company released its 2022 annual report and the first quarter report of 2023, achieving revenue of 839 million yuan in 2022 (+47.74% year on year), net profit of 168 million yuan (+54.02% year-on-year); 2022Q4 achieved revenue of 181 million yuan in a single quarter (+16.43% year on year), and net profit of 32 million yuan (+38.13% year-on-year); 2023Q1 achieved revenue of 162 million yuan in a single quarter (-8.18% year-on-year) and net profit of 33 million yuan (+3.06% year-on-year).
Comment: The 23Q1 performance was basically in line with expectations, and the 22-year performance was affected by increased R&D and equity incentive costs. Looking at 23Q1, revenue declined slightly due to the impact of the epidemic, etc., and 23Q1 achieved revenue of 162 million yuan in a single quarter (-8.18% compared to the same period last year); among them, the telecommunications business was under heavy pressure, and the automobile business developed smoothly. Revenue achieved in 2022 was 839 million yuan (+47.74% year on year), and net profit of the mother was 168 million yuan (+54.02% year on year); among them, the comprehensive gross margin increased 0.88pct to 35.65% year on year; the cost side was affected by increased R&D investment, expansion of R&D teams, and equity incentives. Among them, R&D expenses increased 76.49% year on year, and R&D personnel increased from 177 in 2021 to 280 in 2022. By business, the communications business increased 33.21% year on year. Among them, precision structural parts and shell products increased 9.22% and 46.42% respectively. Gross margin increased slightly due to process optimization and reduction of outsourced processing; the automobile business was driven by mass production of new products, etc., which increased 112.51% year-on-year, and gross margin increased 1.7 pct to 34.52%.
In the long run, in terms of communication business, the company is the core beneficiary target of the 800G upgrade & AI computing power, deeply tied to global giant customers, and accelerated category expansion and major customer development. The company mainly provides high-speed backplane connector components and I/O connector components, which are mainly used in large-scale data storage and switching equipment such as data centers and communication base stations. The company has excellent mold design and precision processing and manufacturing capabilities, and is deeply tied to world-renowned connector giant customers such as Amphenol, Moss, and China Aviation Optoelectronics. In 2022, the company successfully entered the Tyco Communications business module and carried out CAGE and structural parts business cooperation.
Currently, the company and customers are focusing on developing a series of products such as QSFP 112G and QSFP-D, and the core will benefit from the upgrade of 800G optical modules in the future. At the same time, the continued popularity of Chat GPT has brought all new volume to AIGC. It is estimated that demand for computing power will rapidly grow at a rate of more than 20% each year, and the company will benefit the core.
In terms of automotive business, the company successfully transitioned to Tier 1, profoundly benefiting from the wave of electrification and intelligence. Benefiting from the wave of electrification and intelligence of automobiles, the number of bicycles used in automobile connectors and the value of bicycles have increased dramatically. The company continues to deepen cooperation with existing customers such as BYD. Early products gradually passed certification and climbed into mass production in the second quarter of 2022; the company developed products in multiple categories based on existing processes and accumulated over time, and the number of mass-produced projects gradually increased; at the same time, the company continues to increase new customer development and establish cooperative relationships with China's Changan, Xiaopeng Motor, Fuao Automobile, Rosenberg, etc.
Investment advice: It is estimated that in 2023-2025, the company's net profit attributable to the parent is 236, 313 and 400 million yuan, corresponding to the closing price of PE on April 18, 27.5, 20.7 and 16.2 times.
Risk warning: raw material prices have risen sharply, customer development has fallen short of expectations, and the epidemic has exceeded expectations.