Lianchuang Electronics released its report for the third quarter of 2022: the company achieved operating income of 7.903 billion yuan in the first three quarters of 2022, an increase of 10.99% over the previous year, and realized net profit of 204 million yuan, an increase of 8.41% over the previous year.
Key points of investment
The optical industry is growing strongly, and the performance of automotive and high-definition wide-angle lenses is impressive
Benefiting from the rapid development of automotive ADAS systems, the company's core optics business developed smoothly in the first three quarters, with revenue up 37.84% year on year. Among them, automotive optics revenue grew rapidly, up 718.02% year on year, and the development momentum is good. Looking at a single quarter, the Q3 company achieved revenue of 3,030 million yuan (+31.17% year on year) and achieved net profit of 101 million yuan to the mother (+10.86% year on year). In terms of profitability, the company achieved a gross profit margin of 11.58% in the first three quarters of 2022, an increase of 2.64 pct over the previous year. With the restructuring of the company's products, the proportion of products with relatively high gross margin such as automotive optics will gradually increase, and the gross margin center is expected to shift upward. In terms of expenses, the company's sales, management and financial expenses ratios were 0.34%, 3.28%, and 2.06% respectively. Among them, management expenses increased by 46.15% year-on-year, and employee remuneration, asset amortization and equity incentives of major companies increased. In terms of R&D expenses, the company's R&D expenses in the first three quarters of 2022 were 303 million yuan, a sharp increase of 92.55% over the previous year. The main thing is that the company continued to increase investment in R&D, actively introduce high-end technical talents, and empower the company to keep up with the market and optimize the product structure for continuous innovation.
The strategy focuses on in-vehicle optics, and the transformation and upgrading of touch displays
The core optics business is developing smoothly, and the company is making simultaneous efforts in both traditional optics and automotive optics. In terms of traditional optics, the company still maintains the leading position in the industry for high-definition wide-angle lenses and panoramic image modules. Through in-depth cooperation with well-known domestic and foreign customers in the fields of action cameras, drones, panoramic cameras, such as GoPro, DJI, Shadowstone, AXON, etc., the market share and industry position have been further consolidated and improved. 22Q3 high-definition wide-angle lens and module revenue increased significantly, with a year-on-year increase of 72.56%.
In terms of in-vehicle optics, the rapid development of automotive intelligent driving assistance technology, the upgrading of ADAS functions, and the rise of new car building forces are continuously increasing the market demand for vehicle cameras and other vehicle optical devices. The number of bicycle cameras installed and camera specifications are constantly increasing. As an important part of smart cars, the demand for in-vehicle cameras will increase dramatically. Vehicle optics revenue grew rapidly in the third quarter, up 587.62% year on year, and profitability increased. On the customer side, the company continues to deepen strategic cooperation with Mobileye and Nvidia, expand the market share of vehicle cameras in Valeo, Conti, Aptiv, ZF, Magna, etc., while expanding the scale of cooperation with well-known domestic terminal car manufacturers at home and abroad, especially new domestic car builders. In terms of production capacity, the company can now achieve 3KK/month vehicle lens and 800K/month module production in 2022. The second phase of Hefei is expected to be completed in 2025. In the future, it will have an annual production capacity of 80 million vehicle lenses and 60 million image modules.
Furthermore, the company adjusted the direction of development of the touch display business, and the strategy focused on in-vehicle displays. The transformation and upgrading of the touch display business is expected to increase the profitability of this business.
Profit forecasts
The company's revenue for 2022-2024 is predicted to be 105.91, 122.68, and 13.841 billion yuan respectively, and the EPS is 0.28, 0.48, and 0.68 yuan respectively. The current stock price corresponding to PE is 47, 28, and 19 times, respectively, maintaining the “recommended” investment rating.
Risk warning
The risk of fluctuations in demand in the downstream market, the risk of fluctuations in raw material prices, the risk of increased competition in the industry, the risk of production expansion falling short of expectations, etc.