\u3000\u30 Shaanxi Zhongtian Rocket Technology Co.Ltd(003009) 79 Huali Industrial Group Company Limited(300979) )
Event: the company achieved an operating revenue of RMB 17.47 billion in 2021, with a year-on-year increase of 25.40% (excluding the impact of exchange rate changes, a year-on-year increase of 34.09%); The net profit attributable to the parent company was RMB 2.768 billion, a year-on-year increase of 47.34% (excluding the impact of exchange rate changes, a year-on-year increase of 57.55%). In the whole year, 210 million pairs of sports shoes were sold, with a year-on-year increase of 29.46%; That is, ASP denominated in US dollars increased by about 3.5%. In 2021, the gross profit margin was 27.23%, with a year-on-year increase of 3.36 percentage points, and the net profit margin was 15.84%, with a year-on-year increase of 2.36 percentage points.
The concentration of the top five customers has increased, and the new brand cooperation can be expected. The total sales of the top five customers accounted for 92%, which further increased. In terms of growth rate, the growth rates of Nike, Deckers, VF, Puma and UA are 44% / 58% / 13% / 26% / 45% respectively. Nike’s orders increased to 35%, which is the main source of order growth; UA began cooperation in 2018 and climbed to more than 10 million pairs in three years. It is a customer with rapid growth in recent years. In terms of new brands, onrunning, Nb and ASICs cooperate smoothly and are expected to replicate the cooperation path of UA. The company’s production capacity is scarce in the whole field of sports shoes OEM. Through cooperation with the head enterprise, the company further improves its production process proficiency, has a strong willingness to cooperate with the brand, and has sufficient demand for orders in the future.
In 2021, more new capacity will be released, and the capacity growth will tend to be stable in the future. The annual output of 21 years was 210 million, with a year-on-year increase of 29.46%. The sources of the company’s capacity increase include the production of new factories, the expansion of old factories and the improvement of efficiency. 2021: in Q1, three new factories in Vietnam were put into operation, which was the main source of capacity increase in 21 years. By the end of 21, the three factories were still climbing (two to 60%, and one vamp factory had not contributed finished shoes). 2022: the ramp up of new factories and the expansion of old factories will continue to contribute to new production capacity. Future: at the end of the year 22, the first phase of the Indonesian plant will be put into operation, and there are plans for new plants in North Vietnam. The company has sufficient long-term capacity reserves.
The profit margin climbed and stabilized at a high level, showing a leading style under the plight of the industry. The gross profit margin of the company in the 21st year was 27.23%, an increase of 3.36 percentage points, and the gross profit margin in the next four quarters under the comparable caliber showed a very stable state. The stability of gross profit margin comes from the company’s business model and active response to the epidemic, ensuring the normal progress of production. In terms of business model, 1) the prices of main raw materials are determined by brands and raw material suppliers, and the OEM will not bear the pressure of price increase; 2) In terms of exchange rate, the company is denominated in US dollars, and the settlement center is in Hong Kong, which is less affected by the exchange rate. After overcoming the adverse factors such as the epidemic and exchange rate, the profit margin of the company increased by 2.36 percentage points to 15.84% in the 21st year, mainly driven by the continuous optimization of customer structure. The profit margin of the company is at the absolutely leading level in the industry, which shows the style of the leader in sports shoe manufacturing.
Looking forward to the future, the company’s share in the field of sports shoes OEM will continue to increase, with strong profit stability. Under the background that the epidemic in Southeast Asia in 2021 affected the whole supply chain, the company’s production was basically unaffected based on its geographical advantages and excellent factory management. The company’s future growth is still due to the increase of procurement share of major customers (mainly Nike), the large volume of new customers, the continuous release of production capacity and sufficient subsequent production capacity reserves. The company is in the resonance period of customer structure change and production capacity release. In the case of weak expansion of competitors, it is inevitable for the company to increase its share in the industry. The increase in the number of orders of the company’s head brand also means that the product production process is polished more mature, which is conducive to the stability of the company’s profit margin.
Investment suggestion: we believe that the future performance of the company is highly uncertain at this stage, and the current valuation is in a low position after listing. Combined with the company’s production capacity and on-hand orders, the company’s net profit from 2022 to 2024 is expected to be RMB 3.465 billion, 4.218 billion and 5.122 billion respectively, with growth rates of 25.19%, 21.74% and 21.43% respectively. At present, the corresponding PE of the stock price is 24.92, 20.47 and 16.86 times respectively, maintaining the “recommended” rating.
Risk tip: the epidemic situation in Southeast Asia exceeded expectations, the price rise of raw materials exceeded expectations, and the price rise of sea freight exceeded expectations.
