\u3000\u30 Shaanxi Zhongtian Rocket Technology Co.Ltd(003009) 79 Huali Industrial Group Company Limited(300979) )
Event: the company released the annual report of 2021. During the reporting period, the company realized an income of 17.47 billion yuan, an increase of 25.40%, a net profit attributable to the parent of 2.768 billion yuan, an increase of 47.34%, a deduction of non net profit of 2.761 billion yuan, an increase of 47.21%, an EPS of 2.45 yuan and a dividend of 11.00 yuan (including tax) per 10 shares. The company’s performance growth is in line with expectations, the orders of head customers are expanding rapidly, and the advantageous position of the industry is prominent. Excluding the impact of exchange rate fluctuations, the company’s revenue increased by 34.09% and the net profit attributable to the parent company increased by 57.55%.
Comments:
The dominant position of the company is prominent, and the income of head brand is growing rapidly. The company focuses on expanding head brands, building industry-leading new product development, rapid response and cost control capabilities, and continuously expanding production capacity. In 2021, the global demand for sports shoes was strong, the orders of head customers such as Nike and Deckers increased rapidly, and new customers such as ASICs, on running and new balance achieved mass production. In 2021, the revenue of Nike, Deckers, VF, puma, UA and other customers was US $959 million, US $584 million, US $498 million, US $294 million and US $150 million, with a same increase of 43.72%, 57.84%, 13.44%, 26.05% and 44.86%. The company’s head customers had high recognition, the order volume expanded rapidly, and the proportion in customer orders further increased.
The volume and price of products have risen simultaneously, and sports and leisure shoes drive the rapid growth of overall income. In 2021, the company sold 211 million pairs of sports shoes, an increase of 29.46%, and the average price of products was 82.85 yuan / pair, a decrease of 3.13%, mainly due to the appreciation of RMB exchange rate. Excluding the influence of exchange rate, the average price of products increased by about 5% year-on-year. In terms of products: 1) the revenue of sports and leisure shoes in 2021 was 14.211 billion yuan, an increase of 25.94% at the same time. After the impact of the epidemic weakened, the sports demand recovered rapidly, the orders of the company’s main customers increased rapidly, the newly expanded customers achieved mass production, and the revenue of sports and leisure shoes increased rapidly. 2) In 2021, the income of outdoor boots and shoes was 1.583 billion yuan, an increase of 6.16% at the same time, and the income growth was relatively stable; 3) In 2021, the revenue from sports sandals, slippers and other items was 1.637 billion yuan, up 46.60% at the same time, mainly due to the rapid expansion of orders from some customers and the increase in revenue growth.
The gross profit margin increased year-on-year, the expense rate decreased and the profitability increased. 1) In 2021, the company’s gross profit margin increased by 3.36pct to 27.23% at the same time, mainly due to the optimization of customer order structure and the improvement of the company’s cost control ability. Among them, the gross profit margins of sports and leisure shoes, outdoor boots and shoes, sports cool / slippers and other products were 28.88%, 18.66% and 20.52%, increasing by 3.44pct, 1.50pct and 4.89pct at the same time. 2) The company’s R & D expenses and PCT management expenses increased by – 0.93% and – 0.37% respectively, with a rapid growth rate of – 0.091% and – 0.033% in 2021. 3) In 2021, the net operating cash flow of the company was 2.423 billion yuan, a decrease of 18.64%, mainly due to the increase in cash paid for purchasing goods and receiving labor services.
The company continued to expand its production capacity and steadily improved its profitability. The downstream of the company is dominated by overseas demand, the consumption boom of global sports shoes and clothing is high, and the demand growth of head brands is relatively stable. As the leader of sports shoes OEM, the company plans to build new factories in Vietnam, Indonesia, Myanmar and other places in the next three years, and improve the production capacity of existing factories through automation transformation and process upgrading, so as to promote the growth of product sales and revenue. The company actively strengthens the construction of information system, strengthens the cost control of all links, increases R & D investment and innovation according to customer needs and industry trends, meets customers’ diversified product needs and improves the company’s profitability.
Profit forecast and investment suggestions: we slightly raised the company’s EPS forecast from 2022 to 2023 to 2.98/3.56 yuan (the original value is 2.97/3.48 yuan), and the newly added forecast is 3.97 yuan in 2024. The current stock price corresponds to 24.11 times PE in 22 years. We are optimistic about the long-term growth of sports shoes and clothing track. As the leader of sports shoes OEM, the company has obvious advantages, strong certainty of performance growth, large long-term development space and maintains the “buy” rating.
Risk factors: concentrated production areas, rising labor costs, and the spread of covid-19 pneumonia in Vietnam.
