Event: 1H22 achieved revenue of 16.972 billion yuan, down 14.4% from the same period last year; gross profit margin dropped 4.1% year-on-year to 20.8%, mainly due to lower capacity utilization and lower ASP due to the decline in shipments of mobile phone lenses and mobile camera modules. Because: 1) gross profit margin decreased; 2) OPEX expenditure increased compared with the same period last year; 3) the devaluation of 1H22 RMB led to a non-cash floating loss of 600 million US dollars of bonds issued on January 23, 2018, recording an exchange loss of 201 million yuan. 1H22's homing net profit was 1.358 billion yuan, down 49.5% from the same period last year, and the year-on-year decline was at the upper end of the interim profit warning [45% 50%] range.
The demand for 1H22 Android phones continues to be weak, and the profitability of mobile optics is under pressure: against the background of weak demand for Android phones, shipments of 1H22 mobile lens / mobile camera modules are down 9.1% and 20.1% respectively compared with the same period last year. At the same time, mobile optics is still in the stage of periodic downsizing, and industry competition continues to lead to a decline in ASP compared with the same period last year. The decline in shipments over the same period last year led to a significant decline in capacity utilization and a decline in superimposed ASP, resulting in a year-on-year decline in gross profit margin of 1H22 mobile phone lens / mobile camera module, which put pressure on profitability.
The demand for 2H22 Android phones has not yet improved, and mobile phone optical shipments continue the downward trend compared with the same period last year: in terms of mobile phone lenses, in view of the company's entry into the main camera project of major customers in the United States and the peak season in 3Q22, shipments of 3Q22 mobile phone lenses are expected to pick up month-on-month. However, Android phone demand has not yet seen an improvement trend, superimposed Samsung customers in 1Q22, 2Q22 early delivery, 2H22 phone lens shipments year-on-year decline or expansion; mobile phone camera module, considering the weak demand for Android phones, 2H22 shipments are expected to continue to decline in double digits compared with the same period last year. The company has directed that shipments of mobile lens / mobile camera modules for the whole year fell by 15% and 20% respectively compared with the same period last year. ASP and profitability point of view, comprehensive: 1) industry competition continues, but the margin of decline in low-end products ASP narrowed; 2) the company occupies a dominant position in high-end products, 2H22 new machine-driven product structure continues to be optimized, it is expected that 2H22 mobile phone lens, mobile phone camera module ASP, gross profit margin is generally stable.
The growth rate of 1H22 car lens shipments is not as fast as expected, and 2H22 is expected to grow rapidly: 1H22 car lens shipments increased by 0.8% compared with the same period last year, and the growth rate was lower than expected, mainly due to: 1) lack of cores; 2) the lack of materials in the supply chain caused by the epidemic in Shanghai and the Yangtze River Delta, resulting in a slowdown in the company's car lens shipments.
Considering: 1) the sharp increase in sales of new energy vehicles compared with the same period last year led to an increase in demand for on-board lenses; 2) with a low base of 2H21, shipments of 2H22 on-board lenses are expected to grow rapidly compared with the same period last year, and the company has guided that shipments of on-board lenses for the whole year will increase by 10% and 15% year on year.
The new vehicle business and VR/AR have entered the volume stage, and the medium-and long-term growth logic is smooth: the company's lidar / HUD has a total of 20 designated projects in hand, and the vehicle new business has entered the volume stage. In terms of VR/AR, revenue from 1H22 VR/AR-related products rose 11% year-on-year, although the market is expected to lower its shipments of Meta Quest products. In view of the mass production of the company's high-value VR pancake display modules and its main supply position for major customers, revenue from VR/AR-related products is still expected to record more than 50% year-on-year growth in 22 years. Considering: 1) the potential entry of American major customer MR product supply chain; 2) in the long run, the proportion of XR optical value continues to increase, and the company also has the strength to cut into the integration of XR. We expect the new vehicle business and VR/AR to achieve high-speed growth, and the company's medium-and long-term growth logic is smooth.
Earnings forecasts, valuations and ratings: in view of the continued weak demand for Android phones, we have lowered our 22-24 net profit forecasts by 12%, 5%, 6%, to 31.11, 41.94 / 5.28 billion yuan, respectively. The company's current stock price corresponds to the 22 / 23 year net profit forecast 37x/27xP/E, as US major customers make better-than-expected progress, vehicle lidar, VR/AR and other new products drive the increase in the share of net profit of non-mobile phone business, and the superimposed smart eye strategy continues to deepen, which is expected to further open the 23-year valuation space and maintain the "buy" rating.
Risk hint: the competition in the lens industry intensifies; the volume of vehicle lidar and VR/AR products is not as expected.