\u3000\u30 Shaanxi Zhongtian Rocket Technology Co.Ltd(003009) 79 Huali Industrial Group Company Limited(300979) )
The company issued the 2021 performance express, which realized a revenue of 17.47 billion yuan (+ 25.4%) and a net profit attributable to the parent company of 2.768 billion yuan (+ 47.34%); Among them, Q4’s single quarter revenue was RMB 4.836 billion, with a year-on-year increase of 33.48%. Under the high base, the month on month increase was still expanded (the growth rates of Q1 / Q2 / Q3 were 7.77% / 28.52% / 31.46% respectively). In the same period, the net profit attributable to the parent company was RMB 771 million, with a year-on-year increase of 37.43%. If excluding the influence of exchange rate, 2021 income + 34.09% (Q4 income + about 35%) and net profit attributable to parent company + 57.55%.
The recovery of global sports demand and the growth of key customer sales drive the company’s revenue to a new high. In 2021, the world entered the normalization state of the epidemic. With the improvement of vaccination rates in various countries and the continuation of people’s sports enthusiasm after the epidemic, the consumption demand of sports equipment has gradually warmed up. Despite the severe epidemic situation in Vietnam in the second half of the year, the company relied on a stable supply chain and rapid response ability, combined with strong product R & D capacity, expanded production capacity through new factories, expanded factories and the implementation of lean production, improved the operation efficiency of various factories, and successfully attracted and digested the orders transferred by various sports brands to the company. We expect the company’s sales volume to reach 210 million pairs in 2021, driving revenue growth of 25.4%, of which the sales volume of Q4 is expected to reach 57 million pairs, contributing revenue of 4.836 billion yuan, breaking the new high of single quarter revenue. From the perspective of key customers, we expect that the top 5 customers of the company in 2021 are similar to Q3, including Nike, Deckers, VF, Puma and UA.
Key customer strategy & improve efficiency and improve profitability month on month. Under the key customer strategy, the company continues to optimize the customer and product structure, and improves the production efficiency through automation and process optimization. We expect the gross profit margin of Q4 to increase slightly compared with Q3. On the expense side, excluding the impact of changes in accounting policies, the sales expense rate and management expense rate were basically the same in the first three quarters, and the financial expenses decreased significantly, mainly due to the placement of raised funds and the significant increase of interest income during the period. In addition, excluding the impact of exchange rate, we expect the annual income tax expense to increase significantly by 118.12% year-on-year to 916 million yuan (673 million yuan in the first three quarters, year-on-year + 172.76%), which is mainly due to the increase in the company’s profits during the period and the increase in income tax generated by overseas subsidiaries’ dividends to domestic parent companies, which is expected to decline in the future. On the whole, the company’s net interest rate in 2021 is expected to be 15.84% (+ 2.36pcts), of which the net interest rate in Q4 is 15.94% (Q1 / Q2 / Q3 are 15.58% / 15.89% / 15.91% respectively).
Profit forecast and investment suggestions: in the long run, the downstream sports industry is booming, and the company, as the main supplier of many international top sports brands, actively arranges overseas production capacity. Moreover, under its strategy of focusing on categories with large demand and focusing on key customers, it has obvious scale effect and outstanding profitability. It is expected to grow together with high-quality customers in the future and further improve its share in core customers. In the short term, the demand of downstream customers has recovered rapidly, while the peers have tight recruitment due to the Vietnam epidemic, and the downstream customers have urgent demand for the company’s production capacity. On this basis, the company improves its profitability by optimizing the customer structure. At the same time, the company’s original factories continue to improve efficiency, the new production capacity is orderly promoted and accelerated to meet the rapid growth of orders (three new factories in Vietnam are expected to reach production successively in 2022; the first phase of the Indonesian factory is expected to be put into operation by the end of 2022, contributing 23 years of production capacity; the Myanmar factory is under planning). We expect the net profit attributable in 2022 / 23 to be RMB 3.487 billion / 4.247 billion respectively (originally RMB 3.456 billion / 4.189 billion), corresponding to the valuation of 2022 / 23 to be 27 / 22 times. Considering the company’s growth and current valuation, we give a “buy” rating.
Risk warning: the epidemic situation in Southeast Asia affects the production expansion progress less than expected; The terminal demand of downstream customers is lower than expected; Risk of large fluctuation of exchange rate; The public materials used in the research report may have the risk of information lag or untimely update.
