\u3000\u3 Shengda Resources Co.Ltd(000603) 267 Beijing Yuanliu Hongyuan Electronic Technology Co.Ltd(603267) )
Key investment points
Event: the company released its 2021 annual report on March 28. In 2021, the company achieved an operating revenue of 2.403 billion yuan, a year-on-year increase of 41.36%, a net profit attributable to the parent of 827 million yuan, a year-on-year increase of 70.09%, and a net profit deducted from non attributable to the parent of 812 million yuan, a year-on-year increase of 72.50%. The basic earnings per share was 3.57 yuan / share, a year-on-year increase of 70.00%; The weighted average return on net assets was 28.17%, with a year-on-year increase of 7.34pct.
The performance continued to grow rapidly and the profitability was significantly improved. Self produced business, the downstream demand continued to be strong. The company accelerated the improvement of production capacity and continued to expand categories. In 2021, the revenue was 1.348 billion yuan, a year-on-year increase of 52.07%; In terms of agency business, the company continued to strengthen brand and customer development, and achieved a revenue of 1.043 billion yuan in 2021, with a year-on-year increase of 29.13%. Profitability: in 2021, the comprehensive gross profit margin was 51.51%, with a year-on-year increase of 4.76 PCT, of which the gross profit margin of self-produced business was 80.83%, with a year-on-year increase of 0.93 PCT; The gross profit margin of agency business was 13.14%, with a year-on-year increase of 3.06pct; The net interest rate was 34.42%, with a year-on-year increase of 5.83pct.
The ability of cost control has steadily improved, and the investment in R & D has increased significantly. The expense rate of the company during the period was 10.78%, with a year-on-year decrease of 0.1pct, of which the sales expense was 70 million yuan, with a year-on-year increase of 15.14%, mainly due to the increase of share based payment fees, travel expenses, entertainment expenses, service fees and other business expenses; The management fee was 99 million yuan, with a year-on-year increase of 12.60%. Affected by the business development of Hongyuan Suzhou and Hongyuan Chengdu, labor costs and office expenses increased; Financial expenses amounted to 09 million yuan, with a year-on-year increase of 18 million yuan, mainly due to the increase of bank loans and bank acceptance bills; The R & D cost was 81 million yuan, with a year-on-year increase of 78.68%. The company continued to expand product types and improve product performance. After the R & D work of Hongyuan Suzhou was put into operation, the R & D cost increased significantly. The company continues to increase investment in new product R & D, and its core competitiveness is expected to be further improved, so as to promote the continuous growth of industry position and market share.
The company actively prepared production and goods, and the inventory rose sharply. At the end of 2021, the company’s advance payment was 39 million yuan, 51.38% year-on-year, and other receivables were 26 million yuan, 106.19% year-on-year, mainly due to the increase of advance payment and performance bond in agency business; The inventory was 415 million yuan, a year-on-year increase of 93.25%. The company’s revenue scale continued to grow. With the completion of Suzhou raised investment project, the stock of goods and raw materials increased significantly; Fixed assets amounted to 431 million yuan, a year-on-year increase of 84.03%, mainly due to the conversion of Hongyuan Suzhou raised investment project to fixed assets; Short term loans amounted to 291 million yuan, a year-on-year increase of 120.71%.
China’s military MLCC core supplier, and fund-raising projects contribute to performance growth. The company is the core supplier of MLCC for Chinese military. Now it has three industrial bases in Beijing, Chengdu and Suzhou, and has mastered a complete set of technologies from ceramic powder preparation to ceramic capacitor production. MLCC products have a broad market space in the electronic field. At present, the company’s self-produced products are mainly used in the military industry, which is expected to benefit from the acceleration of weapon equipment informatization and domestic substitution; With the continuous improvement of 5g and automotive electronics penetration, the company’s self-produced products are expected to benefit from the import substitution in the civil field. During the reporting period, the company’s IPO project was completed, and the production line has reached the expected usable state. After reaching the production capacity, it will increase the production capacity of 1.925 billion general-purpose MLCCs and 75 million highly reliable MLCCs, and the performance is expected to grow steadily.
Implement the equity incentive plan to demonstrate the company’s confidence in development. On May 17, 2021, the company completed the first equity incentive plan after listing, and granted 928000 shares to 99 senior executives and core backbone with 61.34 yuan / share. The performance assessment requirements are: Based on the revenue in 2020, the revenue growth rate from 2021 to 2023 shall not be less than 30%, 69% and 120%; Or based on the net profit in 2020, the net profit growth rate from 2021 to 2023 shall not be less than 35%, 76% and 128%. We believe that the equity incentive plan will deeply bind the core business backbone with the company’s development, fully mobilize the enthusiasm of employees, continue to contribute to the company’s long-term development, and show the company’s development confidence with high exercise conditions.
Investment suggestion: as the growth rate of the company’s R & D investment exceeded expectations and the growth rate of superimposed agency business income slowed down, we reduced the net profit attributable to the parent company in 202223 to RMB 1.074 billion and RMB 1.344 billion (original RMB 1.104 billion and RMB 1.457 billion), and increased the net profit attributable to the parent company in 2024 to RMB 1.612 billion. The adjusted profit forecast corresponds to EPS of 4.62 yuan, 5.78 yuan and 6.94 yuan respectively, and PE of 27.85x, 22.26x and 18.56x respectively. The company is one of the three major suppliers of China’s military MLCC. The self-produced and agency component business continues to grow rapidly and maintains the “buy” rating.
Prompt on the expected quantity of military products and new orders; The delivery of military orders is less than expected; The risk that the performance forecast and valuation judgment do not meet the expectations.
