\u3000\u30 Shaanxi Zhongtian Rocket Technology Co.Ltd(003009) 79 Huali Industrial Group Company Limited(300979) )
In 2021, the performance increased by 47%, showing a bright performance. 1) According to the company’s annual report, the company’s revenue / performance in 2021 was RMB 17.47 billion / 2.77 billion respectively, with a year-on-year increase of 25% / 47% (excluding the impact of exchange rate changes, a year-on-year increase of 34% / 58% respectively). 2) In terms of single Q4, the revenue / performance of single Q4 in 2021 was RMB 4.84/770 billion respectively, with a year-on-year increase of 33% / 37% respectively.
Good customer demand and optimized product structure. 1) In 2021, the company’s top five customers achieved sales of 6.18/37.6/32.1/18.9/960 billion yuan respectively, accounting for 35% / 22% / 18% / 11% / 6% of revenue respectively. The company’s top high-quality customers have good demand, and the total sales of the top five customers accounted for 92% (an increase of 6pcts compared with 86% in 2019). 2) By category: the sales of sports shoes / outdoor boots / sports sandals and slippers in 2021 were 14.21/15.8/1.64 billion yuan respectively, with a year-on-year increase of 26% / 6% / 47%, of which sandals and slippers grew rapidly. We judge that it is mainly due to the change of customer structure. 3) In terms of regions, the operating revenue of the United States / Europe / other regions in 2021 was RMB 15.20/20.5/190 billion respectively, with a year-on-year increase of 24% / 27% / 160%, and the sales accounted for 87% / 12% / 1% respectively.
Capacity driven growth and continuous construction. 1) The operation is stable, the impact of the epidemic is small in 2021, and the capacity utilization rate is effectively restored. In 2021, the company’s capacity / output / sales volume were 220 / 2.1 / 210 million pairs respectively, with a year-on-year increase of 21% / 28% / 29%. The growth difference was mainly due to the company’s capacity utilization rate of + 5.0pcts to 96% year-on-year. 2) The production capacity continues to expand and is expected to increase effectively. According to the announcement of last year, three new factories in northern Vietnam will continue to be invested and put into operation in the future. We judge that the company will continue to focus on capacity expansion in 2022, and the annual capacity is expected to grow rapidly.
The cash flow returned to normal and the operating turnover was healthy. 1) The operating turnover was healthy. In 2021, the company’s inventory turnover days were 67.4 days, a year-on-year decrease of 7.7 days; The inventory amount was + 28% year-on-year, mainly due to the increase in raw material procurement due to the increase in orders. 2) Good cash flow management. In 2021, the turnover days of accounts receivable decreased by 7.8 days to 43.9 days. The operating cash flow decreased by 19% to 2.42 billion yuan, which is due to the fact that some customers paid in advance through supply chain finance under the epidemic, resulting in a significant increase in cash received in 2020.
Looking forward to the whole year, high profit quality is expected to continue to be maintained. From the perspective of profit quality in 2021: 1) the company’s gross profit margin / net profit margin increased from + 2.4 / + 2.4pcts to 27.2% / 15.8% year-on-year. We judge that the increase in gross profit margin is mainly due to the optimization of customers and product structure. Most of the company’s raw material suppliers are designated and negotiated by customers, so the impact of raw material price fluctuation is small. We believe that the high profit quality is expected to be basically maintained in 2022. 2) The sales / management expense ratio decreased by 1.0/0.3pcts to 0.4% / 3.9% year-on-year, which was relatively stable. 3) Looking forward to 2022, the company’s customers have full demand for orders and rapid expansion of production capacity. We judge that both revenue and performance are expected to grow rapidly.
Investment advice. The company is a leading manufacturer of sports shoes. At present, the demand of the industry is good, the company’s production capacity continues to be large, and the performance is expected to grow rapidly. We expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 3.47/43.1/5.28 billion respectively, and the current share price is RMB 71.78, corresponding to 24 times of PE in 2022, maintaining the “buy” rating.
Risk warning: the covid-19 epidemic exceeded expectations and was unfavorable to overseas orders; Capacity expansion and production line transformation are less than expected; Order fluctuation risk of key customers; Foreign exchange fluctuation risk.
