Guangdong Hongda ( Guangdong Hongda Blasting Co.Ltd(002683) )
On the evening of March 25, Guangdong Hongda released its 2021 annual report. During the reporting period, the company achieved an operating revenue of 8.526 billion yuan, an increase of 33.33% over the previous year; The operating profit was 812 million yuan, an increase of 42.05% over the same period last year; The net profit attributable to the parent company was 480 million yuan, an increase of 18.93% over the same period last year.
Key investment points:
The annual performance grew steadily, and the performance of the traditional defense equipment sector in the second half of the year was slightly lower than expected: Quarterly, the company achieved an operating revenue of 2.74 billion yuan in the fourth quarter, a year-on-year increase of 30.60% and a month on month increase of 22.65%; The net profit was 209 million yuan, an increase of 31.45% year-on-year and 10.58% month on month. The company’s performance in the fourth quarter and the whole year basically met expectations. In terms of sectors, the company’s mining business achieved an operating revenue of 6.11 billion yuan in 2021, with a year-on-year increase of 35.35%, mainly due to the low operating rate of mining service business affected by the epidemic in the first half of 2020, which has returned to normal in 2021, and the company has strengthened cooperation with downstream high-quality customers. The mining service business has achieved both qualitative and quantitative improvement during the reporting period. During this period, the profitability of the sector remained stable, and the gross profit margin of the sector in 2021 was 17.04%, A year-on-year increase of 0.22%. During the reporting period, the civil explosives sector achieved an operating revenue of RMB 1.869 billion, with a year-on-year increase of 43.97%, mainly because the company successively acquired three subsidiaries of Inner Mongolia Risheng civil explosives, Inner Mongolia Ji’an chemical and Gansu Xing’an civil explosives from the end of 2020 to the first half of 2021, successfully opened up the civil explosives markets in North China and the west, and the production capacity of industrial explosives increased to 466000 tons, ranking the second in China. However, during the reporting period, due to the time lag in the price increase of raw material ammonium nitrate and the price increase of civil explosive products, the profitability of the company’s civil explosive business was compressed, and the gross profit margin of the civil explosive sector was 29.34%, down 4.95% year-on-year. In November 2021, driven by the company, the price of civil explosive products in Guangdong has increased by 2000 yuan / ton, and the profitability of the follow-up civil explosive sector will improve. In terms of defense equipment, during the reporting period, Minghua company achieved an operating revenue of 387 million yuan, a year-on-year decrease of about 25%, and a net profit of 461758 million yuan, a year-on-year decrease of about 22%. The performance of the sector declined in the second half of the year, mainly due to the decrease in the order volume of traditional defense equipment products and individual equipment products in the second half of the year, resulting in the performance of the defense equipment sector slightly lower than expected.
Minghua company acquired Hongda Risheng to strengthen the R & D strength of defense equipment sector: Hunan Hongda Risheng Shaanxi Aerospace Power Hi-Tech Co.Ltd(600343) Technology Co., Ltd. has a senior aerospace technology R & D team behind it. In October 2021, Minghua company officially acquired 100% equity of Hongda Risheng by means of cash of 13 million yuan and equity payment of 37 million yuan, which was officially included in the consolidated statements of Minghua company from December 2021, It helps to enhance the company’s R & D and production strength in the field of defense equipment and help the company build a more high-end military project R & D platform.
Profit forecast and investment suggestions: it is expected to realize the net profit attributable to the parent company of RMB 574 / 669 / 766 million from 2022 to 2024; The corresponding PE is 33.6 / 28.9 / 25.2 (corresponding to the closing price of 25.79 yuan on March 25), maintaining the “buy” rating.
Note: considering the landing cycle of military trade business and the order volume and order amount of different products after landing, the revenue of military trade business will have strong uncertainty, which will lead to large deviation in profit forecast, which has little practical reference significance. Therefore, we have temporarily excluded the prediction of military trade performance in the profit forecast. The above profit forecast is the prediction of the future performance of the company’s existing main business, which is intended to show that the company’s existing business will continue to improve even without considering the progress of military trade, and the future performance of military trade business has brought higher growth flexibility and imagination to the company.
Risk factors: the implementation progress of military trade orders is less than expected; Price fluctuation risk of raw materials; Military information opacity risk; The performance of mining clothing and civil explosion is lower than the expected risk; The progress of military trade products under research is less than the expected risk.
