\u3000\u3000 Huali Industrial Group Company Limited(300979) (300979)
Event: the company released the performance forecast for 2021. It is estimated that the net profit attributable to the parent company will be RMB 2.63 billion-2.912 billion in 2021, with a year-on-year increase of 40% - 55%; It is expected to realize a net profit of RMB 2.626 billion to RMB 2.908 billion, with a year-on-year increase of 40% - 55%.
Comments:
Recovery of sports shoes consumption & the company's core barriers are deep, and the booming production and sales drive the performance to grow faster than expected. From the perspective of industry, since 2021, countries have achieved certain results in covid-19 epidemic control, accelerated vaccination, differentiated global economic recovery, and continued recovery of post epidemic sports demand and sports shoe consumption. From the perspective of the company, the company has strong new product development ability, can quickly respond to changes in customer demand, expand production capacity through new construction, expansion of factories and lean production, improve factory operation efficiency and attract brand customers to increase orders. In 2021, the prosperity of production and marketing drove the company's annual revenue to grow rapidly, and the operation efficiency was improved & the optimization of product structure boosted the upward profit space. In a single quarter, the company's 21q4 is expected to realize a net profit attributable to the parent of 633 million yuan to 915 million yuan, with a year-on-year increase of 12.82% - 63.08%, continuing the beautiful growth.
The customer structure is optimized, and the order increment of high-quality key customers can be expected. The company has diversified customer structure and high concentration. The top five customers of 21q1-q3 accounted for 93% of the revenue, and the revenue contribution of Nike / Deckers, the top two customers, increased by 49.2% and 57.7% respectively. Under the strategy of high-quality key customers, the company enjoys stable and high-quality orders. With the in-depth cooperation between the company and its core customers, especially Nike, its performance is expected to continue to grow rapidly. At the same time, the company actively expands new customers with high potential, such as angpao, ASICs and NewBalance, and locks in the future growth space of the brand in advance.
Production capacity expansion has been steadily promoted, and production capacity investment has contributed to performance growth. The company has arranged overseas production capacity earlier. Since 2021, the company has actively expanded production in Vietnam, Indonesia and Myanmar to meet the demand of customer order growth. On December 18, 2021, the company announced that it planned to change the original fund-raising and investment project "Zhongshan Tengxing's annual output of 35 million pairs of woven uppers expansion project" to "Indonesia's shoes production base (phase I) construction project". The project will fully reach production capacity in three years and will increase production capacity by 27.25 million pairs. The continuous release of capacity in many places in Southeast Asia is expected to promote the rapid growth of the company's performance.
Investment suggestion: the sports shoes market continues to boom. Relying on the core advantages of product development, the company grasps high-quality customer resources, accelerates the layout of production capacity and helps the rapid growth of performance. We raised the company's profit forecast. It is estimated that the net profit attributable to the parent company in 21 / 22 / 23 will be RMB 2.763/35.47/4.303 billion (the original forecast value was RMB 2.615/33.43/4.140 billion), corresponding to 35 / 27 / 22 times of the current market value PE respectively, maintaining the "buy" rating.
Risk tip: the cost of raw materials fluctuates sharply, and the global "covid-19" epidemic repeatedly affects end consumption.