Hhc Changzhou Corp(301061) (301061)
The company is an important ODM supplier in the global intelligent electric sofa and intelligent electric bed industry. Founded in 2002, the company is committed to the R & D, design, production and sales of smart electric sofas, smart electric beds and their core accessories. It is an important ODM supplier in the global smart software home industry. At the same time, it also has its own brands such as motomotion and motoseleep. Its business covers many countries such as China, the United States, Australia and France Pride mobility and other international well-known furniture enterprises have established good long-term cooperative relations.
21q1-3 achieved a revenue of 1.49 billion yuan, a year-on-year increase of + 70.4%, and a net profit attributable to the parent company of 236 million yuan, a year-on-year increase of + 53.1%. From 2017 to 2020, the company’s total operating revenue increased from 896 million yuan to 1.318 billion yuan, CAGR was 13.8%, and the revenue scale of 21q1-3 reached 1.49 billion yuan, a year-on-year increase of + 70.4%. From 2017 to 2020, the net profit attributable to the parent company increased from 104 million yuan to 206 million yuan, with a CAGR of 25.6%, and 21q1-3 achieved 236 million yuan, a year-on-year increase of + 53.1%. The gross profit margin and net profit margin of 2021q1-3 company are 33.9% and 15.9% respectively. The gross profit margin is basically stable, and the net profit margin is generally improving.
The business of intelligent electric sofa is growing rapidly, and the business of intelligent electric bed is developing steadily. Smart electric sofa is the company’s core product. In 2017-20, the revenue CAGR was 36.0%, and the revenue in 21h1 was 690 million yuan, a year-on-year increase of + 196.2%, accounting for 70.3% of the revenue. The business of intelligent electric bed is generally stable, with a revenue of 129 million yuan in 21h1, a year-on-year increase of + 9.9%. The proportion of 21h1 smart furniture accessories revenue decreased to 13.9%, mainly due to the company’s adjustment of product structure, the priority of accessories business to ensure the production demand of finished products, and the reduction of external sales. Based on the overseas market, the company’s export accounts for more than 95%, of which the United States is the largest market. From 2017 to 2020, the company’s overseas main business income increased from 850 million yuan to 1.284 billion yuan, with a CAGR of 14.7%. From 2018 to 2020, the company’s export revenue accounted for more than 95%, of which the United States accounted for 88.7% of the total revenue in 20 years.
The global functional sofa market is nearly US $25 billion, and the electric bed market is more than US $4 billion. The Chinese market is still in a low penetration dividend period. Europe and America are the main consumption areas of functional sofa and electric bed at present. The American functional sofa market has been relatively mature, and the electric bed market is in a period of rapid growth; In 2019, the market penetration of China’s functional sofa is about 4.4%, which is in the stage of rapid development, while the electric bed market is still in the stage of awareness improvement, and consumer education still needs time. In the future, with the trend of consumption upgrading and population aging, the scale of China’s smart sofa / bed market is expected to increase rapidly and has broad prospects.
The company has been deeply engaged in the U.S. market for many years, has rich customer resources, and the ODM business continues to grow. Among the top 100 furniture retailers with retail sales in the United States in 2019, the company has established good cooperative relations with 20 of them. The company has three business models: OEM, ODM and independent brand. Among them, the ODM business has achieved a revenue of 758 million yuan in 20 years, and the CAGR in 17-20 years is 30.76%, growing rapidly, accounting for 57.8% of the main revenue in 20 years.
Build an internal vertically integrated supply chain and overseas capacity layout to deal with the risk of trade friction. The company has the self-made ability of core accessories such as motor, electric control and mechanism parts, forms an internal vertically integrated supply chain system, effectively reduces costs, strengthens quality control and improves the overall R & D efficiency of the company. The company established a factory in Vietnam in 2019 to effectively reduce the impact of tariffs. By the time the company was listed, Vietnam ingenuity had become the top 10 factory in the export of Vietnam’s furniture industry.
R & D investment is leading in the industry and creates product competitive advantage with differentiation. The R & D expense rate of the company is leading in the industry and has a number of core technologies and invention patents. R & D capability promotes product renewal and iteration, and the proportion of high value-added products promotes the overall gross profit margin. The company takes the lifting chair as the starting point, and the product has the function of auxiliary standing to meet the needs of consumers with inconvenient movement. The trend of population aging may give birth to the demand for health care functions, which is conducive to manufacturers with mature products to quickly seize the share and establish the first mover advantage.
Profit forecast and Valuation: the company focuses on the R & D, production and sales of smart electric sofas, smart electric beds and smart furniture accessories, deeply binds key customers, a perfect supply chain system and high-quality and multi-functional products drive the company to further expand its revenue scale, with the further expansion of domestic and foreign markets, We expect the company’s revenue to be RMB 1.935/2.457/3.058 billion in the year 21-23, with a year-on-year increase of + 46.8% / + 27.0% / + 24.4% respectively, and the net profit attributable to the parent company in the year 21-23 to be RMB 275 / 3.54/441 million, with a year-on-year increase of + 33.8% / + 28.7% / + 24.5% respectively. The target market value in the year 22 is RMB 6.77-7.4 billion and the target price is RMB 84.17-93.03, which is covered for the first time and given the rating of “overweight”.
Risk tips: raw material price rise risk, exchange rate fluctuation risk, increased international trade friction risk, China’s market expansion is less than expected, short-term stock price fluctuation risk, cross market valuation risk.
