2021 attributable net profit in line with preannouncement

Anjie Technology announced its 2021 results: Revenue rose 33.7% YoY to Rmb3.88bn; attributable net profit fell 57.5% YoY to Rmb199mn, at the upper end of the preannounced range of Rmb159mn-206mn; and recurring net profit grew 41.9% YoY to Rmb94.64mn. In 4Q21, revenue and attributable net profit increased 37.3% and 184.5% YoY to Rmb1.15bn and Rmb94.81mn. The firm plans to distribute Rmb0.2/sh in cash dividend (tax included) for 2021.

Anjie also preannounced that its 1Q22 attributable and recurring net profit rose 1,567.1-2,122.8% and 4,279.1-5,771.6% YoY to Rmb75mn-100mn and Rmb70mn-95mn, mainly driven by continued growth in orders for several businesses and higher revenue contribution from alternative-fuel vehicle (AFV) business.

Trends to watch

Encouraging growth in automotive products and consumer electronics (CE) structural parts. In 2021, CE and automotive products both performed well. Specifically, revenue from smart terminal functional parts, precision structural parts and modules rose 39.8% YoY to Rmb2.35bn and sales volume grew 8.5% YoY, thanks to the firm’s market share and ASP gains with North American CE clients and rising orders for CE products. Revenue from AFV products rose 90.1% YoY to Rmb900mn, and its proportion in Anjie’s total revenue grew 6.9ppt to 23.2%, which we attribute to increasing shipments of North American AFV clients. Profitability wise, gross margin remained stable for CE products, and expanded 6.19ppt YoY to 32.6% for AFV products.

1Q22 earnings solid; upbeat on robust growth of AFV and smartphone products in 2022. The firm maintained steady revenue growth in 1Q22 thanks to continued expansion of CE and AFV businesses, boosting significant profit growth. We estimate stable growth in smartphone revenue and rapid growth in AFV revenue. Given that the high-gross margin automotive business may have contributed a higher proportion of revenue, we think blended gross margin likely improved YoY in 1Q22. In 2022, we are upbeat on rapid growth of AFV business driven by increased shipments of North American AFV clients and capacity expansion. We expect revenue contribution from smartphone business to steadily rise on market share and ASP gains with North American CE clients.

Financials and valuation

Given rapid growth of AFV business, we raise our 2022 and 2023 net profit forecasts by 6.5% and 8.0% to Rmb370mn and Rmb456mn. The stock is trading at 24.5x 2022e and 19.9x 2023e P/E. We maintain OUTPERFORM and a TP of Rmb18.0, implying 33.3x 2022e and 26.9x 2023e P/E, offering 35.7% upside.

Risks

Shipments of North American CE and AFV clients disappoint; continuous losses from Weibrass.