Introduction to this report:
Zhejiang HENGWEI (301222. SZ) is a leading manufacturer of zinc manganese battery industry in China and has accumulated many well-known overseas customers. In 2020, the company achieved an operating revenue of 486 million yuan and a net profit attributable to the parent company of 96 million yuan. As of February 18, the average PE (Lyr) of comparable companies in 2020 was 38.99 times (excluding companies listed on the new third board).
Summary:
The company’s core highlights and IPO offering and Investment: (1) the company is a leading enterprise in China’s zinc manganese battery industry. With the advantages of process equipment and technology, the company has accumulated stable customer resources, including Kodak’s brand operator strand, Japan’s leading enterprises in baiyuandian industry, Daiso, Kanematsu, Li & Fung, dollartree and so on. From the perspective of the whole industry, the development of retailers’ own brands has opened up a broad market space for OEM manufacturers. The continuous rise of new electrical appliances has continuously expanded the market demand of battery products and provided new impetus for the development of the company.
(2) 25333400 shares are proposed to be publicly issued, and the total share capital of the company after this public offering is 101333400 shares. The company’s investment project with raised funds complies with relevant national industrial policies and development strategies, has good market prospects, and can further enhance the company’s comprehensive competitiveness and promote sustainable development.
Main business analysis: benefiting from the expansion of the sales scale of major customers, the company’s operating revenue and net profit increased rapidly. From 2018 to 2020, the operating revenue was 316354900 yuan, 322013900 yuan and 485733500 yuan respectively, with a compound growth rate of 23.91%. Alkaline battery is the main source of the company’s main business income, accounting for 87.70%, 85.19%, 74.43% and 74.60% of the current main business income in the reporting period. The company’s gross profit margin remained basically stable, and the new revenue standard reduced the gross profit margin and sales expense rate.
Industry development and competition pattern: the development of smart home has promoted the popularization of all kinds of intelligent small household appliances and opened a new market space for zinc manganese batteries. According to fortune business insights, the global alkaline battery market will reach US $7.48 billion in 2019 and US $10.71 billion in 2027. According to KD market insights, the global carbon battery market in 2018 was US $1.721 billion and will maintain a stable growth in the future. At present, China has become the largest zinc manganese battery manufacturer in the world, and the overseas market has become the most important market for Chinese zinc manganese battery manufacturers. China’s zinc manganese battery industry has full market competition and a high degree of marketization, and has formed a number of mature international enterprises.
Valuation of comparable companies: the company’s industry is “C38 electrical machinery and equipment manufacturing industry”, and the static P / E ratio in recent one month (as of February 18, 2022) is 45.01 times.
The company’s main business is the company, specializing in the R & D, production and sales of high-performance environmental friendly zinc manganese batteries. According to the disclosure of the prospectus, the company selects Zhejiang Mustang Battery Co.Ltd(605378) (605378. SH), Changhong energy (836239. BJ), liwang shares (831627. NQ) and Yajin Technology (830806. NQ) as comparable companies when analyzing relevant financial indicators. As of February 18, 2022, the corresponding average PE (Lyr) of comparable companies in 2020 was 38.99 times (excluding liwang shares and Yajin technology, companies listed on the new third board).
Risk tips: 1) trade protection policy risk; 2) Industry overcapacity risk.
