Jinhua Chunguang Technology Co.Ltd(603657) (603657)
Vacuum cleaner hose leader, ranking first in the industry for ten years Jinhua Chunguang Technology Co.Ltd(603657) is mainly engaged in the R & D, production and sales of clean electrical hose and accessories, and is committed to making clean electrical products
Manufacturers provide diversified, systematic and customized hose and accessories integration solutions. The company’s hose and accessories products are mainly used in the fields of vacuum cleaner, ironing machine, dishwasher and outdoor cleaning industrial dust removal system. The sales volume and market share of vacuum cleaner hose produced in recent ten years rank first in the industry, and the main economic indicators and product quality rank first in the plastic industry of Zhejiang Province for three consecutive years.
The acquisition and layout of clean electrical appliances at home and abroad are accelerated, and the coordinated development of categories is accelerated
In order to expand the business field of clean electrical appliances, the company purchased 100% equity of Vietnam suntone Technology Company Limited and relevant business assets of Suzhou Haili Electrical Appliance Co., Ltd. Among them, Vietnam suntone, founded on January 14, 2020, is mainly engaged in the R & D, production and sales of complete vacuum cleaners. It has formed a production capacity of processing and assembling 1.5 million complete vacuum cleaners, and is a supplier of Midea in Vietnam; Haili electric appliance is mainly engaged in the R & D, production and sales of vacuum cleaner machine business. Its production and operation has been stable in the past three years, and has accumulated rich high-quality customer resources. Jinhua Chunguang Technology Co.Ltd(603657) and Haili Electric Co invested in Suzhou shangteng, holding 55% and 45% respectively and forming a related relationship.
Stable cooperation with high-quality customers, reduce substitution risk, determine production by sales and closely follow market demand
The company has been deeply engaged in the clean electrical hose industry for many years. Through improving the production process and continuous technological accumulation and innovation, the company provides customers with diversified, systematic and customized hose and accessories products, and has long-term cooperative relations with Dyson, Midea, shark and other Chinese and foreign brands. The company’s product sales adopts the direct sales mode, and the production mode is based on sales. The shipment is stable. According to the 20-year annual report, the production and sales rate of various hoses is between 92% – 97%. After the company sells the hose and accessories to its designated vacuum cleaner ODM / OEM manufacturer, the ODM / OEM manufacturer manufactures the complete vacuum cleaner and sells it to the vacuum cleaner brand enterprise.
The whole machine business is ready to go and is expected to grow rapidly in the future
China has a broad OEM market for clean electrical appliances. We benchmark the development path of Japanese clean electrical appliances similar to China. According to our calculation, according to the OEM scale of the Chinese market, the sales market scale of vacuum cleaners / floor sweepers / floor washers in China in 2022 will be RMB 1.65/26.5/2.03 billion respectively, totaling RMB 6.33 billion. If we only consider OEM in the Chinese market, assuming that Chunguang accounts for 5-10% of the Chinese OEM market in 2022, the revenue scale of the company’s whole machine OEM business in 2022 will be RMB 320-630 million; The acquired Vietnam suntone has the production capacity to process and assemble 1.5 million vacuum cleaners per year. Assuming that the OEM price of vacuum cleaners in Vietnam is the same as that in China, the production capacity of 1.5 million vacuum cleaners corresponds to the OEM revenue of at least about 500 million. If it can be added to the OEM business of overseas brands, the OEM revenue will be larger. The coordinated development of new and old businesses can improve the self-production rate of complete machine parts, and is expected to improve the profit level of complete machine OEM in the future.
Investment suggestion: Jinhua Chunguang Technology Co.Ltd(603657) is the leader in China’s clean electrical hose and accessories industry. Relying on the advantages of technology and products, it has long served b-end high-quality customers, adopted leading technology and created scale advantages to reduce costs and increase efficiency. The company has arranged the whole machine field through the acquisition of vacuum cleaner enterprises at home and abroad. It is expected that the long-term revenue will grow steadily and the cash flow will be good. With the steady growth of the scale of the clean electrical hose business and the further release of the whole machine capacity, the performance is expected to grow further. Therefore, we expect the net profit of the company from 2021 to 2023 to be RMB 150 / 2.2 / 290 million respectively; The corresponding dynamic estimates are 21.9x, 14.5x and 11.2x respectively. We selected clean electrical appliances and small household appliances companies in the industry for comparison. Based on the PE and market value of comparable companies in the industry, with reference to the average valuation of the industry, and considering the high growth rate of the company’s whole machine OEM business revenue, we can consider appropriately increasing the valuation range. Therefore, we give the company a reasonable valuation range of 20-25 times PE in 2022, corresponding to the market value of RMB 4.5-5.6 billion in 2022, The corresponding reasonable price range per share is 33.4-41.8 yuan / share. Give a “buy” rating.
Risk warning: raw material price fluctuation risk; Market competition risk; Risk of substitute products; exchange-rate risks; OEM penetration rate is lower than expected; There are subjective judgments and extreme values in the calculation, which are only for reference.
