LANDAI TECHNOLOGY(002765)：1H22 EARNINGS IN-LINE WITH AUTO PARTS SUPPLIED TO GLOBAL HIGH-END CLIENTS

Landai’s 1H22 earnings were in line with expectations, and the decline in operating revenue and earnings was mainly affected by the decline in the touch display division’s earnings. Due to the impact of Covid outbreaks in Shanghai and the power shortage in Chongqing, we lower our 2022E EPS estimate. Considering the Company's motor shaft production, supply contracts with world-renowned clients and the likely start of large-batch motor shaft supply next year, we raise our 2023E-24E EPS estimates. We are bullish on the rapid growth of automotive parts for new energy vehicles (NEVs). We raise our target price to Rmb13 and reiterate the "BUY" rating.
1H22 earnings were in line with expectations, and the slip in revenue and earnings was mainly affected by the decline in touch display.
On the evening of Aug 29, 2022, the Company released the 2022 interim report, achieving operating revenue/attributable net profit (ANP)/ex-one-off ANP of Rmb1.35bn/0.09bn/0.08bn (-16.5%/-23.7%/+4.8% YoY), in line with expectations. We believe that the decline in the Company's 1H22 operating revenue and ANP is mainly affected by the decline in the touch display segment (accounting for 68% of revenue in 2021), mainly a result of the slowdown of the electronics industry and the impact of local Covid flare-ups.
With the easing of the pandemic, the demand recovery in the electronics industry and the rapid growth of the automotive parts segment, the Company's operating revenue and earnings are likely to resume high growth.
In 1H22, the overall GPM decreased by 1.3ppts YoY, while the GPM of the automotive parts segment increased by 2.3ppts YoY.
In 1H22, the overall gross profit margin (GPM) was 17.1% (-1.3ppts YoY), and the slight decline was mainly caused by the electronic components segment, which accounted for a large proportion of revenue and achieved operating revenue of Rmb0.85bn (-25.9% YoY) with a GPM of 19.2% (-1.81ppts YoY).
Moreover, the automotive parts segment continued to grow, achieving 1H22 operating revenue of Rmb0.42bn (+17.8% YoY) and a GPM of 11.8% (+2.3ppts YoY). We believe the higher GPM of the automotive parts segment came on the back of the rising proportion of new products and the increasing scale effect, benefiting from the high shipments of new products such as balance shafts and gearboxes. With the continuous shipments of new products such as automotive touch screens and NEV parts in 2H22, the Company's overall GPM is likely to rebound.
NEV motor shafts have been shipped, and customer development has been successful for NEV gearboxes & transmission parts.
The Company's NEV parts segment has achieved remarkable results: 1) The Company has a rich product matrix, including high-precision transmission gears and motor shafts, some of which have entered the stage from prototypes to small-batch production, and motor shafts have entered the stage of mass production. 2) The Company’s customer base covers auto OEMs and world-renowned tier-1 auto parts suppliers, including Nidec, Valeo Siemens, GLB Intelligent Power Technologies, Chongqing Jinkang Powertrain New
Energy, Geely Auto, SAIC Motor and BYD. 3) The Company actively expanded production capacity by investing in the NEV high-precision transmission gear and motor shaft manufacturing project to meet customer needs. We believe that the Company's NEV parts segment is on the right track, and the commissioning of new production capacity will promote the growth of the automotive parts segment and boost the GPM.
Potential risks
Intensive competition in the touchscreen display market; price fluctuations and rising costs of raw materials; touch-control technology updates and fast product upgrades; setbacks in merger integration and goodwill impairments.
Investment recommendation
Landai’s 1H22 earnings were in line with expectations, and the decline in operating revenue and earnings was mainly affected by the decline in the touch display division’s earnings. Due to the impact of Covid outbreaks in Shanghai and the power shortage in Chongqing, we lower our 2022E EPS estimate to Rmb0.44 from Rmb0.53. Considering the Company's motor shaft production, supply contracts with world-renowned clients and the likely start of large-batch motor shaft supply next year, we lift our 2023E/24E EPS forecasts to Rmb0.72/0.92 from Rmb0.71/0.86, implying a 2022-24 CAGR of c.37%.
With Shuanghuan Driveline (002472.SZ), Tianma Microelectronics (000050.SZ) and Token Sciences (300088.SZ) trading at 28.2x 2022E PE and about 1.1x PEG on average based on Wind consensus estimates, we assign 0.8x PEG and 30x 2022E PE out of prudence based on comps valuation and considering the Company’s earnings CAGR to raise our target price to Rmb13 and reiterate the "BUY" rating.
【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。