Preannounced 2021 earnings in line with market consensus

Anjie Technology (Anjie) preannounced its 2021 earnings: Revenue grew 32.52-35.96% YoY to Rmb3.85-3.95bn; net profit attributable to shareholders dropped by 56.03-66.06% to Rmb159-206mn; recurring net profit climbed 27.43-79.90% to Rmb85-120mn. The company saw a YoY decline in net profit but a YoY growth in recurring net profit. This was mainly because of its high base of 2020 nonrecurring gains, driven by fair value gains from income recognition of earnings compensation of its subsidiary, Weibrass. The company’s preannounced 2021 recurring net profit was in line with market consensus. Specifically, in 4Q21, the company estimates its revenue grew 33.22-45.15% to Rmb55-102mn and its attributable net profit soared 64.17-205.22% to Rmb112-122mn.

Trends to watch

Revenue growth encouraging; main businesses of consumer　electronics robust. The company attributed its over 30% revenue growth to its continuous efforts in enhancing its competitive advantages in new energy vehicle (NEVs), smart phones, all-in-one computers, laptops, tablet PC, virtual reality (VR) and augmented reality (AR) and smart home technologies. In 4Q21, shipments were mainly driven by North American clients. Meanwhile, after the company’s acquisition of Weibrass, we expect both the average selling price (ASP) and revenue with North American clients to grow, thanks to the synergy between Anjie’s die-cutting technology and Weibrass’ metal manufacturing. In addition, the company plans to expand its presence in VR and AR and smart home technologies.We expect increasing downstream demand for shipments to further boost the company’s revenue.

Revenue contribution from AFVs improved; room for growth　promising. The company benefited from a growing number of sales orders in 2021. The proportion of the new energy products in sales orders continued to increase thanks to the rapid revenue growth of the AFV market, in our view. In terms of key clients, Anjie is a main functional component supplier for two Tesla models, rising sales from which have further boosted revenue. We expect the company to benefit from the booming sales at existing clients, and to continue to expand its client base.On the other hand, we believe the company will expand wireless charging system business, and enhance value generated by new businesses through continuous improvement on FATP (final assembly test and pack).

Valuation and recommendation

Considering Weibrass’ ongoing losses, we cut our 2021 and 2022 net profit forecasts by 48.2% and 42.7% to Rmb183mn and Rmb347mn, and introduce our 2023 net profit forecast at Rmb422mn. The stock is trading at 27.8x 2022e and 22.8x 2023e P/E. Considering good prospects of the company's new energy vehicles and other new business, we maintain an OUTPERFORM rating and our target price unchanged at Rmb18.0 (35.3x 2022e P/E), offering 27.6% upside.

Risks

Disappointing shipments of new iPhones and Tesla; continuous losses from Weibrass.