HUATIAN TECHNOLOGY(002185)：1H22 DEMAND UNDER PRESSURE;RESULTS MISS EXPECTATIONS

1H22 results miss our forecast
Huatian Technology (HTT) announced its 1H22 results: Revenue rose 10.72% YoY to about Rmb6.22bn; gross margin slid 6.21ppt YoY to 19.33%; attributable net profit fell 16.10% YoY to Rmb514mn; recurring net profit fell 34.72% YoY to Rmb313mn.
In 2Q22, revenue rose 6% YoY and 7% QoQ to about Rmb3.21bn; gross margin slid 6.53ppt YoY to 20.64% (+2.71ppt QoQ); attributable net profit fell 7% YoY to Rmb307mn (+49% QoQ); recurring net profit fell 37% YoY to Rmb164mn (+11% QoQ). Selling, G&A, R&D, and financial expense ratios were largely flat QoQ. Overall, 1H22 results missed our forecasts, mainly because of weak consumer electronics demand.
Trends to watch
The broad-based chip shortage which challenged the global semiconductor market, especially the end market, eased in 1H22. The market experienced a structural divergence. Demand for consumer electronics like cellphones came under pressure, whereas demand for chips for automobiles and new energy-based power production remained sizeable. As the market for existing consumer electronics remains large, we believe the worsening business climate for relevant chip design and distribution industries could first spread to semiconductor packaging and testing areas. Consequently, the orders and capacity utilization rate of relevant firms could decline, in our view.
HTT’s subsidiaries in Xi’an, Kunshan, and Nanjing recorded revenue of about Rmb1.34bn (-7% YoY), Rmb832mn (+16% YoY), and Rmb858mn (+95% YoY) in 1H22, respectively. These the profitability of three subsidiaries profitability declined to different degrees due to lower capacity utilization rate and logistics disruption due to COVID-19.
HTT invested about Rmb1.84bn in 1H22. It established another two subsidiaries, Shanghai Huatian and Huatian Xinsheng. HTT’s joint venture (JV), Guangdong Shaohua Technology has completed integrated circuit packaging, testing, and the construction of a new-display plant. The JV focuses on installing and debugging production equipment.
Financials and valuation
We cut our 2022 and 2023 revenue forecasts 11% and 13% to about Rmb13.61bn and Rmb15.62bn, as market demand may remain soft, thus further weighing on the firm’s profitability. We reduce our 2022 and 2023 earnings forecasts 21% and 23% to around Rmb1.28bn and Rmb1.40bn. The stock is trading at 24x 2022e and 22x 2023e P/E. We maintain OUTPERFORM and cut TP by 15% to Rmb11.00, implying 27x 2022e and 25x 2023e P/E, offering 14% upside.
Risks
Downstream demand weakens; capacity expansion disappoints.
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   【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。