\u3000\u3 Bohai Water Industry Co.Ltd(000605) 068 Mingxin Automotive Leather Co.Ltd(605068) )
Event:
The company announced in the afternoon of March 13 that the controlling shareholders, actual controllers and some directors, supervisors and senior managers plan to increase their holdings of the company’s shares by means permitted by Shanghai Stock Exchange within 12 months from the date of disclosure of this announcement, including but not limited to centralized bidding and block trading, with a total increase ratio of not less than 0.5% and not more than 1% of the company’s total share capital, The price of the shares to be increased this time is no more than 30.00 yuan, and the capital source of this increase plan is individual self owned funds.
Comments:
Business improvement can be expected, and the shareholding increase plan shows the confidence of the management
The company is the leader of high-quality automobile leather in China, and its core customer is FAW Volkswagen. The sales volume in 2019 / 2020h1 accounts for 91.06% / 94.57%. In the future, with the marginal improvement of chip supply and Volkswagen’s efforts in the new energy vehicle market, Volkswagen’s vehicle sales in China are expected to recover, and the improvement of the company’s operation is worth looking forward to. At the same time, the company accelerated the strategic reserve of raw materials to cope with the risk of price rise. By the end of the third quarter of 2021, the company’s inventory was 550 million yuan, an increase of 34.79% over the beginning of the year. This shareholding increase demonstrates the actual controller and management’s confidence in the future sustainable development of the company and their recognition of the company’s long-term value investment.
The automobile leather market is broad, the company actively develops new customers, and the market share is expected to increase
1) in 2019, China’s automobile leather output was 416 million square feet, with a compound growth rate of 3.70% from 2010 to 19. In the future, with the stable development of China’s automobile market, especially the rapid growth of electric intelligent vehicles and the upgrading of interior configuration, the automobile leather market is expected to continue to grow steadily. In terms of competition pattern, it is mainly foreign-funded or joint ventures, and the company’s share will increase to 8.16% in 2019. 2) The company actively expands production capacity, develops new customers and new projects, arranges overseas markets, and can grow in the future.
The new product water-based super fiber leather has been mass produced and supplied, and the improvement of the company’s product structure can be expected
1) environmental friendly chrome free tanned leather mainly supporting medium and high-end and new models has become the company’s leading product, and the average price and profitability of the company’s products have been continuously improved. In the future, with the implementation of new customers and new projects of the company, the product structure is expected to continue to improve, and the profitability is expected to remain stable and rise. 2) The new product developed by the company, all water-based Dingdao super fiber leather, realizes mass production and supply. The “2 million square meters water-based fixed Island super fiber new material intelligent manufacturing project” implemented by Mingxin Menorca (Jiangsu), a wholly-owned subsidiary, has been put into operation, and the super fiber business income of 2021h1 company is 370752 million yuan. As of November 30, 2021, the company has abundant orders on hand. According to the nomination letter, it is predicted that the sales of super fiber products in 202123 will reach 65 / 152 / 250 million yuan respectively. We believe that in the future, with the continuous launch of the production capacity (including convertible bond projects) of Mingxin Menorca (Jiangsu), water-based microfiber leather will continue to contribute important performance increments to the company and become a medium and long-term growth point.
Profit forecast and maintain the “overweight” rating
Considering that the north and South Volkswagen was greatly affected by the lack of core and the rise in the price of raw materials last year, we lowered the company’s profit forecast. It is expected that the company’s EPS will be 1.17/1.51/1.99 yuan / share in 202123, corresponding to 16 / 12 times of PE in 202223, and the valuation is lower than that of auto parts. In view of the company’s future benefits from the recovery of the industry, new customers and the large volume of waterborne super fiber leather, we will maintain the “overweight” rating.
Risk warning: the recovery of production and sales of core customers is lower than expected; The development of new customers is lower than expected; Chip shortage exceeded expectations; Overseas market development is lower than expected; The price rise of raw materials exceeded expectations; Exchange rate fluctuation risk; Cost growth exceeded expectations
