\u3000\u30 Shaanxi Zhongtian Rocket Technology Co.Ltd(003009) 94 Joy Kie Corporation Limited(300994) )
Event: Recently, the office of the US Trade Representative (USTR) issued a statement that it would resume the tariff exemption of some Chinese imports. The tariff exemption involves 352 of the previous 549 pending products. This provision will apply to goods imported from China between October 12, 2021 and December 31, 2022.
Comments:
The tariff exemption list includes electric bicycles, some complete bicycles and parts. The tariff exemption list includes electric bicycle products (export tax No. 87116000, bicycles equipped with driving motors), some complete bicycle products (bicycle category 8712, several types of tariff exemption), and some parts (carbon fiber bicycle frame). The company’s business exported to the United States is mainly its own brand, accounting for more than 10% of its revenue. The products of baby carriages and adult vehicles maintain a high growth trend. The company plans to promote its own brand of electric bicycles in the United States. We believe that this tariff exemption will help the company improve its medium and long-term profits.
The valuation has returned to the bottom range, and pessimistic expectations have been reflected. We believe that the company’s share price has returned to the bottom range after some adjustment. The main reason for the adjustment is the concern about export demand, sea freight, tariffs and short-term operating conditions. The current share price has been fully reflected. With the gradual elimination of pessimistic factors, the company’s valuation is expected to be repaired. In the first quarter, the European conflict affected the demand to some extent. In addition, the Chinese epidemic affected the supply and put pressure on the short-term operation. We expect the epidemic to delay the delivery and have a limited impact on the annual performance.
The export demand of bicycles has significantly warmed up, and the freight rate has gradually decreased with the mitigation of the epidemic. From January to February 2022, the growth rate of bicycle export volume in Taiwan was 10.31% and 41.93% respectively, the growth rate of bicycle export volume was – 2.16% and 20.77% respectively, the growth rate of electric bicycle export volume was 18.85% and 22.31% respectively, and the growth rate of export volume was 8.22% and 15.01%, which continued to improve month on month. The root cause of the high freight rate lies in the shortage of work and container congestion in the port caused by the epidemic. With the gradual release of the epidemic, the freight rate is expected to gradually decline. At present, the freight rate has fallen from a relatively high level.
Profit forecast and investment rating: considering the impact of some demand caused by European conflict, the improvement of profits brought by tariff exemption, the relative prosperity of industry demand after the epidemic, the gradual decline of sea freight after the epidemic, the firm competitive position of the company’s ODM main business and the growth of independent brand and electric bicycle business, we expect the net profits from 2021 to 2023 to be 215 million yuan, 302 million yuan and 446 million yuan respectively, The corresponding EPS is 1.11 yuan / share, 1.55 yuan / share and 2.30 yuan / share respectively, and the corresponding PE of the current stock price is 26 times, 19 times and 13 times respectively. Maintain the company’s “buy” rating.
Risk factors: the risk of changes in economic environment and trade policies, the risk of exchange rate fluctuations, the risk of sudden and disastrous events such as repeated epidemics, the risk of intensified market competition, the risk of price fluctuations of raw materials, etc.
