DESAY SV AUTOMOTIVE(002920)：VEHICLE INTELLIGENCE DRIVES HIGH EARNINGS GROWTH IN 4Q21

　　2021 earnings up to 60.75% YoY, in line with the preannouncement
　　Desay SV Automotive （Desay SV） announced its 2021 results:Revenue rose 40.75% YoY to Rmb9.57bn, attributable net profit grew 60.75% YoY to Rmb833mn, and recurring net profit increased 77.71% YoY to Rmb821mn. Attributable net profit and recurring net profit were close to the upper limit of the preannounced range. In 4Q21, revenue gained 30.61% YoY to Rmb3.27bn, attributable net profit advanced 70.93% YoY to Rmb342mn, and recurring net profit increased 45.94% YoY to　Rmb341mn. In 4Q21, Desay SV’s revenue, attributable net profit, recurring net profit, and net operating cash flow rose to a historical high.
　　Trends to watch
　　Expanding emerging and mainstream auto brand clients; client　structure less concentrated. In 2021, Desay SV acquired new clients （Lotus and PSA） and obtained important orders from emerging auto brands （Li Auto and XPeng） and core platform programs from traditional　mainstream clients. Annualized sales of new orders grew over 80%　YoY in 2021 to more than Rmb12bn. The largest five clients contributed over 50% of revenue in 2017-2020 and 49.97% in 2021, with the concentration ratio down 4.84ppt YoY. We attribute this to the firm’s leading position in vehicle intelligence and its efforts to build a more diverse and balanced client structure.
　　Smart cockpit and intelligent driving are growing rapidly; gross　margin up YoY. Revenue from the smart cockpit and intelligent driving business rose to Rmb7.89bn （up 33.52% YoY） and Rmb1.39bn （up 94.78% YoY） in 2021, with gross margin （GM） at 24.45% （up 0.43ppt YoY） and 20.78% （up 9.94ppt YoY）。 Desay SV’s in-vehicle infotainment （IVI） system secured new orders from Volkswagen, Great Wall Motor, Geely, GAC Motor, and Chery. Specifically, the display module and system business revenue more than doubled YoY. The second-generation cockpit domain controller （CDC） has achieved mass production, and the third generation has already obtained orders. The firm plans to develop the fourth generation jointly with the Qualcomm Snapdragon platform.Surround-view and park assistant system achieved mass supply in　2021 with annual sales volume of over 1mn units. Annualized new orders for smart driving exceeded Rmb4bn. IPU03 （an autonomous driving domain controller） for XPeng P7 and P5 has been mass produced. The　computing power of Orin platform-based IPU04 has notably improved, in our view. Desay SV has secured multiple orders for IPU04, and we expect it to start contributing revenue in 2022. The firm strengthened its investment layout in smart sensing （Robosense and Audiowell） and autonomous driving （Maxieye） in 2021. It also developed cross-domain integration, body domain control, and other new products.
　　Financials and valuation
　　We are upbeat about Desay SV’s leading position in tier-1 domestic smart car brands. We expect its intelligent products to maintain rapid growth despite short-term disruptions in the market. According to the　latest data for orders announced by the firm, we lift our revenue and profit forecasts for the smart cockpit and lower our revenue and profit forecasts for intelligent connected vehicle （ICV） and other sectors. We reduce our 2022 and 2023 net profit forecasts by 1.8% to Rmb1.17bn and by 4.6% to Rmb1.64bn. The stock is trading at 0.85x 2023e PEG. We maintain an　OUTPERFORM rating. We cut our TP 13.6% to Rmb142.50 （1.20x　2023e PEG）， offering 41.9% upside.
　　Risks
　　COVID-19’s negative impact on car supply and demand; changes in competitive industry landscape; vehicle intelligence disappoints.
【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。