\u3000\u3 Shengda Resources Co.Ltd(000603) 578 Zhejiang Three Stars New Materials Co.Ltd(603578) )
Event: Zhejiang Three Stars New Materials Co.Ltd(603578) issue annual report for 2021. In 2021, the company achieved an operating revenue of 826 million yuan, a year-on-year increase of 43.52%; The net profit attributable to the parent company was 984981 million yuan, a year-on-year increase of 18.15%, and the net profit not attributable to the parent company was 807373 million yuan, a year-on-year increase of 32.23%.
The release of production capacity promoted the high growth of the company’s revenue. In 2021, the company’s revenue increased by 43.52% year-on-year, mainly due to the release of production capacity of the initial project of conversion to fixed assets in the previous period, the increase of production capacity of the company in the current period and the increase of sales orders. In 2020, the company’s glass door production project with an annual output of 300000 sets of medium and high-end low-temperature storage equipment and the glass door production project with an annual output of 120000 sets of large volume refrigerators have been completed, and the fixed assets of 220366 million yuan and 276102 million yuan have been transferred respectively. In addition, the company acquired 20% of the shares of Qingdao Weisheng Electronic Plastic Co., Ltd. and included them in the consolidated statements, which also increased the company’s operating income to a certain extent. In terms of products, glass door body is the main source of revenue of the company. During the reporting period, the company’s glass door body revenue was 652 million yuan, a year-on-year increase of 58.6%, accounting for 78.95% of revenue. The high growth of the company’s glass door body revenue is mainly driven by the growth of sales volume. In 2021, the company’s glass door body production and sales volume were 397.62 square meters and 384.33 square meters respectively, with a year-on-year increase of 46.14% and 41.95%; The revenue of plastic products was 148 million yuan, with a year-on-year increase of 8.37%. The company’s revenue of plastic products mainly came from Qingdao Weisheng consolidated statement; The revenue of deep-processing glass was 9.481 million yuan, a year-on-year decrease of 7.79%. We believe that the main reason for the decrease is that when the demand for glass door products is strong, the company will reduce the undertaking of external deep-processing glass orders and focus its production capacity on providing deep-processing glass for its own use.
Consolidated statement: Qingdao Weisheng pulls down the gross profit margin of the company. In 2021, the gross profit margin of the company’s sales was 18.87%, a year-on-year decrease of 11.22pct, mainly due to the consolidation of Qingdao Weisheng. Qingdao Weisheng’s gross profit margin is 0.85%, which is far from other products. The gross profit margin of the company’s glass door body was 22.88%, a year-on-year decrease of 4.80pct. We believe that the main reasons for the decline of gross profit of glass door body are the rise of raw material prices and the intensification of market competition in the industry. The gross profit margin of deep-processing glass was 26.12%, with a year-on-year increase of 5.70pct. However, due to the relatively low proportion of deep-processing glass revenue, the gross profit of the company was limited. In terms of period expenses, the company’s sales, management, R & D and financial expenses in 2021 increased by 32.08%, – 15.83%, 57.81% and – 25.44% year-on-year respectively, and the expense rates were 1.42%, 2.29%, 3.19% and 0.93% respectively, with year-on-year changes of – 2.78%, – 2.19%, – 0.72% and – 0.99% PCT. The company’s management expense ratio decreased significantly, mainly due to the high equity incentive expenses of the company in the same period last year. Overall, the company’s net profit margin was 11.55%, a year-on-year decrease of 8.47pct.
The company’s production capacity will continue to improve. In 2019, the company publicly issued A-share convertible corporate bonds, raising a total of 191565 million yuan. The raised funds will be invested in the “new deep-processing glass project with an annual output of 3.15 million square meters”. Due to the impact of covid-19 epidemic, the procurement, arrival, installation and commissioning of equipment of the project still need a long period, and the project has been postponed to may 2022. After the project is put into operation, the company’s production capacity will be further improved. During the reporting period, the orders of the company’s main old customers increased rapidly, and developed high-quality new customers such as Panasonic cold chain, which won the trust and support of end customers such as Yuanqi forest. With the improvement of the company’s production capacity, the company’s production capacity can meet the needs of more customer orders, and the revenue is expected to be further improved.
Investment suggestion: the company is the leading glass door body of low-temperature storage equipment, with stable customers. With the gradual release of production capacity, the company is expected to enjoy the development dividend of the industry and rapid growth of performance. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 139, 171 and 193 million yuan, and the corresponding EPS will be 1.0, 1.23 and 1.38 yuan. It will be covered for the first time and rated as “recommended”.
Risk warning: risk of raw material price change; The risk of intensified market competition; The risk that the production capacity is less than expected.
