\u3000\u30 Zhongyan Technology Co.Ltd(003001) 24 Shenzhen Inovance Technology Co.Ltd(300124) )
Event: the company released the performance forecast for the first quarter of 2022, realizing a revenue of 4.607 ~ 4.948 billion yuan, a year-on-year increase of 35% ~ 45%; The net profit attributable to the parent company was 679 ~ 743 million yuan, with a year-on-year increase of 5% ~ 15%.
Core view: the performance is in line with expectations and the revenue side has strong growth. The growth rate of profit side is lower than that of revenue, which is mainly due to inflation and more investment in strategic business. Affected by the macro-economy and “dual control”, the industrial control industry has entered a downward cycle since Q3 in 2021. At the end of 2021, the central economic conference set the tone of “steady growth”. The year-on-year growth rate of social finance stock in March rebounded to 10.6%, an increase of 0.4 PCT compared with February. Social finance is a forward-looking indicator of the industrial control industry. Based on the marginal change of the data, we judge that the industry is at the bottom stage of fundamentals, The pace of recovery depends on the pace of epidemic control and the strength of policy support. Breakthroughs have been made in customer expansion and new products of the company’s new energy business. It is expected to turn losses into profits in 2022, which can partially hedge the decline in the growth rate of the main business and become a new performance growth point.
The prosperity of the industry bottomed out and the revenue side grew strongly. Based on the median of the performance forecast, the Q1 revenue in 2022 was 4.948 billion yuan, a year-on-year increase of 40%, and the net profit attributable to the parent company was 743 million yuan, a year-on-year increase of 10%. Among them, the growth rate at the income side maintained rapid growth, which was due to the obstruction of the foreign supply chain under the impact of the epidemic. The company seized the market share by virtue of its excellent supply guarantee ability, coupled with the company’s new industries (lithium battery, photovoltaic and semiconductor). From the perspective of time dimension, it has been about three quarters since the macro-economy weakened in the third quarter of 2021, driving the prosperity of the automation industry down. We judge that the industry fundamentals are at the bottom stage. In March 2022, the stock of social finance increased by 10.6% year-on-year, with a strong growth rate. With the follow-up steady growth policy, the industry is expected to usher in recovery.
Inflation intensified, the gross profit margin was under pressure, and the profitability was repaired after the price increase. The growth rate of Q1 net profit in 2022 was lower than that of the revenue side, which was due to inflation suppressing the gross profit margin (the cost of raw materials such as bulk commodities & Chips increased sharply) and higher year-on-year growth rate of strategic business investment expenses (control layer software, digitization, energy management, new energy vehicles and business reform). According to the official account No. April 3rd, the price increase of general automation and industrial Siasun Robot&Automation Co.Ltd(300024) products in April 15th will be 5%-8%. The profitability will be fixed after raising prices, but it can not cover the cost increase in the past 1 years. Compared with foreign brands, the price increase range and frequency of the company are relatively restrained. Because the company’s strategic orientation is to give priority to market share, the price increase event is also from the side and the opposite. The cost pressure of the manufacturing supply chain is large, and the share is expected to accelerate to the leading under the impact of inflation.
Long term focus on management change and strategic business progress. Management reform is the driving force for the company’s long-term growth. From “product platform” in 2018 to “integrated supply chain” in 2019, “top sinking” in 2020 and “strategic traction” in 2021, the company is building a process and system to ensure long-term competitiveness. We believe that the “ceiling” of the company cannot be measured by the traditional industrial control market space. The improvement of strategic emerging business investment and management efficiency will continuously broaden the growth boundary of the company.
Investment suggestion: it is estimated that the revenue growth rate of the company from 2021 to 2023 will be 57%, 38% and 33% respectively, and the net profit growth rate will be 69%, 7.5% and 50.6% respectively. The six-month target price is 57.6 yuan, corresponding to the valuation of pe40x in 2022, and the investment rating of overweight-a will be given.
Risk tip: the macro economy continues to decline, global inflation continues to deteriorate, and the sales volume of new energy vehicles is lower than expected;
