9M22 profit alert
- 9M22 revenue expected to grow 54%-56% y-o-y (in-line)
- 9M22 net profit expected to grow 40%-48% y-o-y (slightly above)
- Implied net margin compression of 60-120bps y-o-y (ahead)
- Currently rate BUY with TP of Rmb91 under review
LONGi announced a profit alert for 9M22 results. The company expects 9M22 revenue to grow 54%-56% y-o-y to between Rmb86.4bn and Rmb87.4bn. This accounts for c.75% of our full year FY22 revenue estimate, largely in-line with our expectations. LONGi expects 9M22 net profit to grow 40%-48% y-o-y to between Rmb10.6bn and Rmb11.2bn. This represents c.85% of our full year FY22 net profit estimate, slightly above our expectations. The implied net margin is c.12.3%-12.8%, above of our full year estimate of 11.2%. Net margin is expected to compress c.60-120bps, narrower than we had expected.
We reckon the strong expected results for 9M22 is boosted by increased investment income. This should likely arise from good performance of LONGi’s polysilicon joint ventures Sichuan Yongxiang and Yunnan Tongwei. The company also credited currency tailwind for the expected growth in 9M22 profit. For the 3Q22 results announcement, we would be cautious on gross margin compression, particularly in the module segment.
Currently we have a BUY recommendation. Our recommendation and target price of Rmb91 is under review.