\u3000\u30 Shaanxi Zhongtian Rocket Technology Co.Ltd(003009) 79 Huali Industrial Group Company Limited(300979) )
The company released its 2021 annual report, and achieved a revenue / net profit attributable to the parent company of 17.47/2.768 billion yuan (+ 25.4% / + 47.34%); Among them, Q4's revenue in a single quarter was 4.835 billion yuan (+ 33.46%), the growth rate under the high base increased month on month (the growth rates of Q1 / Q2 / Q3 were 7.77% / 28.52% / 31.46% respectively), and the net profit attributable to the parent company was 771 million yuan (+ 37.39%) in the same period. Excluding the impact of exchange rate, the annual revenue of 2021 is + 34.09% (Q4 revenue + about 35%), and the net profit attributable to the parent company is + 57.55%. In addition, the company plans to pay a cash dividend of 1.1 yuan / share at the end of the period.
The upgrading of customer structure drives the revenue to a new high, and the capacity expansion ensures the long-term sustainable growth. Under the normalization of the epidemic in 2021, the global consumption demand for sports shoes has recovered strongly. With strong product development ability, the company can quickly respond to the changes of customer demand. At the same time, it can expand production capacity through new factories, expanding old factories and implementing lean production, improve the operation efficiency of factories and deepen cooperation with new and old brands. In 2021, the company's sales volume reached 211 million pairs (+ 29.46%), driving the continuous growth of revenue, including about 57.53 million pairs of single Q4 sales, driving the single quarter revenue to a new high. And the product structure continues to upgrade, with ASP + 4.5% expected for the whole year.
In terms of customers, the top 5 customers' revenue contributed 16.01 billion yuan, accounting for 91.65%, and further improved month on month (91.16% in 21h1). We expect that the customer structure is similar to Q3, followed by Nike (35.38%), Deckers (21.54%), VF (18.37%), puma (10.84%) and UA (5.52%). Excluding exchange rate factors, the revenue amount was + 43.72% / 57.84% / 13.44% / 26.05% / 44.86% year on year respectively.
By category, the proportion of sports casual shoes / outdoor shoes / sports sandals, slippers and other income is 81.4% / 9.1% / 9.4% respectively. In terms of growth rate, sports and leisure / outdoor boots and footwear increased by + 25.94% / + 6.16% year-on-year, and slipper orders increased by 46.6% year-on-year. We expect to mainly benefit from the changes in the product structure of customers' ugg (customers increased the proportion of wool slippers due to the increase of home time under the epidemic).
Looking forward to 2022, when the supply chain of sports brands is still tight, the company's three new plants in North Vietnam are expected to achieve full capacity production. At the same time, the first phase of the new Indonesian plant is also in the period of capacity climbing. Superimposed on the transformation and upgrading of old plants in Vietnam, we expect to drive the company's sustained and rapid growth throughout the year.
Under the key customer strategy & improving efficiency, the profitability has been significantly improved. In 2021, the company's gross profit margin was 27.23%, which was + 3.35pcts under comparable caliber (the company's accounting policy changed in 2021, and the transportation expenses / customs declaration expenses were adjusted from sales expenses to operating costs), which mainly benefited from the continuous optimization of the company's customers and product structure under the key customer strategy (ASP increased by about 4.5% at the same time), and improved production efficiency through automation and process optimization. On the expense side, the sales / management / R & D expense ratio under the year-on-year caliber was - 0.1 / - 0.32 / - 0.16pcts to 0.37% / 3.93% / 1.34% respectively, which were optimized. Meanwhile, the financial expenses decreased significantly (- 0.7pcts to - 0.26%), mainly due to the conversion of exchange gains and losses during the period from losses in the same period last year to profits, as well as the placement of raised funds and the significant increase of interest income. Overall, the annual net interest rate was 15.84% (+ 2.36pcts), of which the net interest rate of Q4 in a single quarter was 15.94%, which continued to increase month on month (Q1 / Q2 / Q3 were 15.58% / 15.89% / 15.91% respectively). In addition, the annual income tax expense increased significantly by + 118.12% year-on-year, mainly due to the annual profit growth of the company and the increase of income tax generated by the implementation of two dividends during the period. It is expected to be improved and the net interest rate will be increased in 2022.
The overall operation is improving, and the difference between operating net cash flow and net profit gradually returns to the normal level. During the period, the company's inventory / accounts receivable turnover days were -7.75 / - 7.82 to 67.38/43.87 days respectively. At the same time, the company's net operating cash flow was - 18.64% year-on-year and accounts receivable was + 40.55% year-on-year. This was mainly due to the impact of the epidemic in 2021, the implementation of supply chain finance by some customers to pay for goods in advance, resulting in a significant increase in operating cash inflow in the same period last year and a low level of accounts receivable. By the end of 2021, the difference between net profit and operating cash flow had narrowed to 345 million yuan month on month (258 million yuan in 21h1), which is expected to return to the normal level in 2022.
Profit forecast and investment suggestions: in the long run, the downstream sports industry is booming, and the company, as the main supplier of many international top sports brands, actively arranges overseas production capacity. Moreover, under its strategy of focusing on categories with large demand and focusing on key customers, it has obvious scale effect and outstanding profitability. It is expected to grow together with high-quality customers in the future and further improve its share in core customers. At present, the demand of downstream customers has recovered rapidly, while the peers have tight recruitment due to the Vietnam epidemic, and the downstream customers have urgent demand for the company's production capacity. On this basis, the company improves its profitability by optimizing the customer structure. At the same time, the company's original factories continue to improve efficiency, the new production capacity is orderly promoted and accelerated to meet the rapid growth of orders (three new factories in Vietnam are expected to reach production successively in 2022; the first phase of the Indonesian factory is expected to be put into operation by the end of 2022, contributing 23 years of production capacity; the Myanmar factory is under planning). We estimate that the net profit attributable in 2022, 23 and 24 will be RMB 3.411 billion, 41.16 billion and 4.996 billion respectively, with a corresponding valuation of 25 / 20 / 17 times. Considering the company's growth and current valuation, we maintain the "buy" rating.
Risk warning: the epidemic situation in Southeast Asia affects the production expansion progress less than expected; The terminal demand of downstream customers is lower than expected; Risk of large fluctuation of exchange rate; The public materials used in the research report may have the risk of information lag or untimely update.
