\u3000\u3 Bohai Water Industry Co.Ltd(000605) 155 Zhejiang Xidamen New Material Co.Ltd(605155) )
Key investment points
In the past 21 years, sales increased rapidly, and the trend of product structure optimization was obvious
The company announced its performance in 2021: the operating revenue was 465 million yuan (+ 31.4%), the net profit attributable to the parent company was 89.5 million (+ 15.0%), and the net interest rate was 19.23% (- 2.74pct). Despite the adverse factors such as the epidemic situation, the rise of sea freight and the price of raw materials in 2021, the company has achieved rapid growth in sales scale with the advantages of international standard product quality and absolute cost performance, and its position as the leader of functional sunshade fabrics in China has been further consolidated. In Q4 alone, the company's revenue was 130 million (+ 20.1%), and the net profit attributable to the parent company was 17.48 million (- 17.1%), which slowed down compared with the first three quarters, mainly due to the delay of delivery caused by the difficulty of shipping reservation.
The product structure was further optimized and the overseas market grew strongly. In terms of products, the sales of sunshine fabrics / full shading coated fabrics / semi shading coated fabrics / dimmable fabrics / sun shading finished products in 2021 were RMB 1.69/1.42/0.62/0.58/0.23 billion respectively, with a year-on-year increase of 32% / 23% / 18% / 61% / 55%. Sunshine fabrics and dimmable fabrics, as the company's key development products, are higher than coated fabrics in terms of technical content, unit price, gross profit margin and market demand. Their relatively high growth rate drives the optimization of the company's product structure; In addition, as a strategic product for the company to extend the industrial chain and cultivate the end consumer market, sunshade products also achieved rapid growth, and the gross profit margin increased 5pct to 35%. In terms of regions, the proportion of export sales increased 2pct to 66.7%, and the overseas market is still the core growth driver.
The profit margin is under pressure in the short term, and the effect of production optimization and transformation is remarkable
The rise of raw materials has put pressure on the gross profit margin, and the investment in new business has driven the increase of sales expenses. In 2021, the company's gross profit margin was 37.0% (- 3.4pct), which was mainly due to the rise in the prices of polyester fiber and PVC since the second half of the year, and the lag in the price adjustment of the company. The company's sales expense rate / management expense rate / R & D expense rate / were 6.65% / 6.56% / 3.88% respectively, with a year-on-year increase of 3.33/0.11/0.16pct, of which the increase in sales expense was mainly due to the company's investment in providing special operation team and signing image spokesmen to develop new software business, but the business has not contributed revenue.
It is expected that production optimization and transformation will bring more than 20% capacity elasticity. In 2021, the company's total output of sunshade fabrics was 35.78 million square meters (+ 39.5%). Considering the relatively low utilization rate of production capacity in 2020, we expect the production capacity to increase by nearly 30% (nearly 38 million square meters) year-on-year in 2021. It is expected that most of the production capacity improvement comes from technological transformation and process optimization, and a small part comes from the production of new production capacity. In 2021, the sales volume of sunshade fabrics was 33.39 million square meters (+ 33%), and the production and sales rate was 93% (- 5pct). At the end of the year, the inventory increased by 43% to 9.49 million square meters, mainly due to the delay in delivery. With the easing of shipping, the inventory is expected to decline.
Entering the ramp up period of production capacity, we are optimistic about the sustained high growth in 22 years
For a long time, it has the dual promotion logic of "China's penetration rate + overseas market share". Functional sunshade materials have a strong substitution trend for traditional cloth curtains. However, at present, the penetration rate in China is only 3%, which is far from 80% in Europe and America, and the long-term space is broad; In addition, with the advantages of integrated design and cost-effective industrial chain, the company is expected to gradually improve the market-making rate of overseas design.
The new production capacity will reach the production capacity at the end of the year, and the new business is worth looking forward to. The main plant of the company's raised investment project has been basically completed and has been put into operation successively. It is expected to reach production by the end of 22 years, and 16.5 million flat sunshade fabrics and 2 million flat sunshade finished products will be added. At present, the company has been placing orders for 3-5 months, with full capacity utilization, and has established cooperative relations with international well-known customers such as Hunter Douglas and vertilux, which is expected to have a strong growth momentum throughout the year. In addition, the company's new business of soft software is expected to be available this year, which is worth looking forward to.
Profit forecast and valuation
It is estimated that the net profit attributable to the parent company in 22-24 years will be RMB 120 / 170 / 220 million respectively, with a corresponding growth rate of 38% / 36% / 31%. The current market value corresponds to PE of 16 / 12 / 9x Zhejiang Xidamen New Material Co.Ltd(605155) as a leading enterprise of functional sunshade materials in China, it will benefit from the improvement of "China penetration rate + overseas market share" for a long time, and its growth will enter an accelerated period in the future. We believe there is room for improvement in the current valuation of Zhejiang Xidamen New Material Co.Ltd(605155) and maintain the "buy" rating.
Risk tips
Price fluctuation risk of raw materials; Risk of deterioration of foreign trade environment; The development of software business was less than expected
