\u3000\u3 China Vanke Co.Ltd(000002) 585 Jiangsu Shuangxing Color Plastic New Materials Co.Ltd(002585) )
The overall performance in 2021 is slightly higher than expected, and the new production capacity in 22 years will be implemented as scheduled. In 21 years, the company’s revenue was 5.93 billion yuan (YoY + 17.22%), the gross profit margin was 32.8% (YoY increased by 10.43 percentage points), the net profit margin was 23.4% (YoY increased by 9.12 percentage points), and the net profit attributable to the parent company was 1.385 billion yuan (YoY + 92.3%). In terms of performance, the company previously issued a notice, and the market has been expected. However, combined with the revenue and gross profit performance of the four new material sectors disclosed in the annual report and the partial conversion of 300000 tons of production capacity to fixed assets last year, we believe that the overall performance of the company is still slightly higher than our expectations. At the same time, the company has made a prospect for each segment in 22 years. With the continuous conversion of 300000 tons of production capacity to fixed assets and production capacity, the 200000 tons of optical production capacity of 1H22 and the continuous operation of an additional 700 million square meters of coating workshop of 2h22, the profit contribution of new materials will reach 88% in 2022.
Traditional packaging films continued to shrink and new material production capacity was released, boosting profits. By the end of 2020, the company’s production capacity was 560000 tons, including about 200000 tons of optical grade production capacity of new materials. In 2021, the company added 6 lines with a total of 300000 tons of optical grade production capacity, driving the overall output to 524000 tons, with a year-on-year increase of 16.4%, and the sales volume was 510000 tons, with a year-on-year increase of 3% (the sales volume was higher than the output due to de stocking in 2020), the revenue increased by 17.2%, the gross profit increased by 71% and the net profit increased by 92.3%; Its four new material sectors, namely Costar Group Co.Ltd(002189) , new energy, heat shrinkage and information, achieved revenue of 4.086 billion, contributing 69% of the revenue, with a month on month increase of 15 percentage points; The gross profit was 1.46 billion yuan, accounting for 74.7% of the overall gross profit, an increase of 14.5% month on month; The gross profit of the overall new material sector increased by 112% year-on-year, much higher than the overall 71% level of the company.
The new material products were improved, the scale effect resisted the rise of raw material costs, and the gross profit and net interest rate of 4q21 and 2h21 performed steadily month on month. The gross profit margins of 1q-4q of the company in 21 years are 32.7%, 34.7%, 32.6% and 31.8% respectively, and the gross profit margins of 1h21 and 1H22 are 33.7% and 32.2% respectively; The net profit margins of 1q-4q are 21.6%, 24.1%, 23.1% and 24.3% respectively, and the net profit margins of 1h21 and 1H22 are 22.9% and 23.7% respectively. Different from the market expectation, although the raw materials fluctuate sharply in 2022, the gross profit margin and net profit margin of the company remain stable. The main reasons are: 1) the proportion of new materials increases and the price transfer ability is strong; 2) Purchase raw materials with quantity to stabilize the fluctuation of gross profit margin; 3) The new capacity has significant scale and cost advantages over its peers.
The base film and coating capacity continue to release, the proportion of new materials increases, and the company’s market share and gross profit and net profit indicators are expected to continue to lead the industry. The company disclosed that 1h2022 company will continue to put in four production capacity with a total capacity of 200000 tons, and 700 million square meters of new coating capacity will be gradually released in the second half of the year (300 million square meters originally, a total of 1 billion square meters). Therefore, we believe that: 1) the new capacity will continue to climb and the production and sales volume will continue to increase; 2) Coating capacity further brings profit elasticity.
Risk warning: the covid-19 epidemic situation, the macro uncertainty caused by the situation in Russia and Ukraine, and the production line installation and production capacity are lower than expected.
Investment suggestion: raise the profit forecast and maintain the “buy” rating. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 5.4/69/88 billion yuan (the increase range of the predicted value from 22 to 23 will be 12% / 17% respectively), with a year-on-year growth rate of 60 / 45 / 31%. It is expected that the company’s quarterly improvement and annual high growth will be a high probability event. At present, the share price corresponding to 22-year PE is only 10.3 times, far lower than that of peers, maintaining the “buy” rating.
