Yinghe Technology Maintains High Growth with Overseas Expansion

Recently, China Galaxy Securities released a research report stating that it continues to maintain its recommended rating for Wiinv Microelectronics Technology (300457.SZ).

According to the research report, WinHEC Technology has disclosed its half-yearly report for 2023. In the first half of 2023, the company achieved an operating revenue of 4.801 billion yuan, an increase of 3.84% year-on-year. It also achieved a net profit attributable to the parent company of 2.98 billion yuan, a year-on-year increase of 12.81%. Non-GAAP net profit reached 2.63 billion yuan, a year-on-year increase of 0.54%. In the second quarter, the company's revenue was 3.063 billion yuan, a decrease of 0.24% compared to the same period last year, but an increase of 76.28% compared to the previous quarter. Net profit was 1.95 billion yuan, a decrease of 2.34% year-on-year, but an increase of 89.26% compared to the previous quarter.

The reasons for the ratings mainly include the following factors: the performance of 23H1 showed a steady growth overall, with overseas revenue accounting for over 30% of the total.

The growth in production capacity of domestic battery companies in China has slowed down, with a decline in bidding demand. In the first half of 2023, the lithium battery equipment revenue of the company was 3.259 billion yuan, a 26.10% decrease compared to the same period last year. Against the backdrop of rapid development in the global new energy vehicle market, overseas battery companies are accelerating their production expansion. With over a decade of experience in the lithium battery equipment industry, the company has established deep collaborations with international clients such as Volkswagen, BMW, ACC, and LG New Energy. As a result, the proportion of overseas orders has increased, with overseas revenue from lithium battery equipment accounting for over 30% in the first half of this year.

The increase in the share of highly profitable e-cigarette business, combined with the continuous improvement of operational management capabilities, has led to a significant increase in the company's profitability levels.

The e-cigarette business has shown strong profitability, with gross profit margins and net profit margins reaching 40.91% and 29.11% respectively in the first half of 2023. The e-cigarette business accounted for nearly 30% of the company's revenue in 23H1, effectively boosting its profit levels. The company's comprehensive gross profit margin was 26.65%, up 7.28 percentage points year-on-year, and the net profit margin was 10.19%, up 4.41 percentage points year-on-year. In Q2, the gross profit margin was 28.20%, up 7.65 percentage points year-on-year and 4.27 percentage points quarter-on-quarter, while the net profit margin was 10.94%, up 3.94 percentage points year-on-year and 2.08 percentage points quarter-on-quarter, marking a continuous improvement for three consecutive quarters. On the expense side, the company's sales expense ratio was 2.29%, down 0.08 percentage points year-on-year, the management expense ratio was 2.87%, up 0.46 percentage points year-on-year, and the research and development expense ratio was 6.83%, up 1.89 percentage points year-on-year, as the company continues to explore new product technologies.

The overseas market is flourishing, and Scolar's e-cigarette business is experiencing rapid growth.

The global e-cigarette market is experiencing rapid growth, with a year-on-year increase of 20% projected for 2022. Particularly, the disposable e-cigarette category is witnessing explosive growth and rapidly increasing its market penetration. The United States, United Kingdom, and Canada stand as the top three consumer nations for e-cigarettes worldwide. Spearheading its own brand initiatives, Scorch has made significant efforts since 2022 to establish its presence in the market and obtain TPD certification for its new e-cigarette products in Europe.

In March of this year, Skorel established a wholly-owned subsidiary, SKE E-CIGS UK LTD, in the UK, with a focus on expanding the e-cigarette market in the UK and Europe. With its superior product technology and multi-channel development through various retailers, Skorel has rapidly emerged in the UK market, soaring from seventh place in January to fourth place in April in terms of sales.

On the other hand, China is a major exporter of e-cigarettes, with exports reaching $5.482 billion in the first half of 2023, a year-on-year increase of 29.16%. In July of this year, the Office of the National Tobacco Monopoly Administration issued guidelines on promoting the construction of a quality assurance system for e-cigarette exports, further enhancing the quality management of e-cigarette exports and reducing business risks for export companies. Skoer has made breakthrough progress in expanding overseas markets, achieving revenues of 1.433 billion yuan in the first half of 2023, a year-on-year increase of 1477.33%; and achieving a net profit of 417 million yuan, already reaching 76% of last year's full-year results. Benefiting from strong demand in overseas markets, Skoer's performance is expected to maintain a high-growth trend. The e-cigarette business, which has high profitability and a strong ability to collect payments, will contribute to the performance flexibility of Winning Technology.

It also mentions risks in its report.

The economy's recovery fell short of expectations, as did the expansion of new products. Core technology updates were rapid, intensifying market competition. Risks such as fluctuating prices of raw materials and concentration of material suppliers exist.