\u3000\u3 Shengda Resources Co.Ltd(000603) 977 Jiangxi Guotai Group Co.Ltd(603977) )
Event: on April 9, the company released its annual report for 2021, realizing an operating revenue of 1.988 billion yuan, a year-on-year increase of 13.29%; The net profit attributable to the parent company was 240 million yuan, a year-on-year increase of 25.01%; Net profit deducted from non parent company was 223 million yuan, with a year-on-year increase of 30.03%.
In 2021, the net profit margin of sales increased steadily, and the expense rate continued to improve during the period. In 2021, the company’s net profit margin on sales was 14.06%, with a year-on-year increase of 1.09pct, mainly due to the continuous improvement of corporate governance level and the improvement of period expense rate by 0.83pct compared with last year. In 2021, the company’s expense ratio was 21.32%, of which the management expense ratio was 15.95%, a year-on-year decrease of 0.67pct; The financial expense ratio was 1.44%, a year-on-year decrease of 0.23pct. The proportion of the company’s administrative expenses and financial expenses decreased, indicating that the company’s management level continued to improve and its financial situation improved.
Operating cash flow continues to improve, and R & D expenses continue to increase. In 2021, the net cash flow from the company’s operating activities was 313 million yuan, an increase of 14.17% over the same period last year, mainly due to the growth of the company’s revenue scale and the increase of annual cash collection over the same period last year. The company pays attention to R & D and continues to increase R & D investment. In 2021, the company’s R & D expenditure was 104million yuan, a year-on-year increase of 10.89%, and the R & D investment intensity remained above 5% for four consecutive years. In terms of R & D personnel, the company has 478 R & D personnel, with a year-on-year increase of 10.65%, accounting for more than 20%. We believe that with the continuous increase of R & D expenses and the continuous expansion of R & D personnel, the core competitiveness of the company is expected to be further enhanced.
The scale of assets was further expanded and the asset liability ratio continued to be optimized. During the reporting period, the company’s total assets at the end of the reporting period were 4.376 billion yuan, an increase of 593 million yuan or 15.69% over the end of the previous year. The main asset items for growth were construction in progress, accounts receivable and transactional financial assets. The construction in progress was mainly due to the increase in investment of Hongtai logistics’s construction in progress during the reporting period, and the transactional financial assets were mainly due financial products at the end of the reporting period. At the same time, the company strengthened debt management. In 2021, the asset liability ratio was 29.87%, down 1.51pct. The owner’s equity further increased, reaching 3.069 billion yuan, a year-on-year increase of 18.23%, of which the undistributed profit was 730 million yuan, a year-on-year increase of 31.27%. We believe that the further expansion of the company’s asset scale and the continuous improvement of its asset liability situation will provide a solid foundation for the company’s steady development in the future.
The sales of electronic detonators increased by 69%, and the first release Bureau complied with the policy. In 2021, the prices of main raw materials in the civil explosive industry rose sharply. The company achieved contrarian growth in revenue by optimizing product structure and adjusting product prices. During the reporting period, the company sold 159600 tons of industrial explosives, of which the mixed explosives exceeded the 40000 tons mark for the first time; 38.44 million industrial detonators were sold, of which electronic detonators grew rapidly under the influence of comprehensive promotion policies. They were sold in 2021 (8.24 million, + 69%). The gross output value of the company’s civil explosive business ranks eighth among more than 70 civil explosive production enterprises in China. The comprehensive replacement of electronic detonators is imminent. During the reporting period, the company planned the planning, construction and capacity replacement of digital electronic detonators at a high level. Xinyu Cathay Pacific, a wholly-owned subsidiary, has completed the construction of phase II of digital electronic detonators, and the phase III project has entered the stage of equipment installation and commissioning. At the same time, the company seized the opportunity period of structural adjustment of civil explosive industry and first released the Bureau’s industrial chain to enhance its comprehensive competitive strength. In July 2021, the company established Guokun microelectronics in a joint venture with Shanghai Kuncheng to implement the digital electronic detonator delay control module project with a total design annual output of 50 million, laying the foundation for the company’s subsequent establishment of capacity and scale advantages. We believe that the company will seize the opportunity of comprehensive replacement of electronic detonators, actively plan, comply with the policy and layout the industrial chain in advance, which is expected to promote the civil explosive business to a new level.
The development of military products can be expected by increasing investment in Australian Science and technology new materials and multi-point layout. In September 2021, the company subscribed 51% equity of Aoke Xincai with its own capital of 416327 million yuan. Aoke new material is an enterprise specializing in the scientific research and production of military tungsten based new damage materials and new non-metallic fiber materials. The company controls by increasing capital and shares, and takes the near bulletproof warhead business field as an opportunity to further expand the field of military new materials from the direction of defense equipment. Aoke new material now has ak17, ak06 and other main products, and is expected to release considerable profits after the finalization and approval. We believe that the company actively seeks valuable investment targets and multi-point layout in the military industry, benefiting from the mass production and delivery of new equipment and the improvement of weapons and ammunition WAR storage during the 14th Five Year Plan period, and the development of military products business can be expected.
Investment suggestion: as a leading enterprise of civil explosives in Jiangxi Province, the company actively promotes industrial transformation and upgrading, and forms a new version of civil explosives integration + rail transit automation and informatization + military industry. Through industrial coordinated development, the company is expected to accelerate the release of performance and enhance the company’s core competitiveness. We estimate that the net profit attributable to the parent company from 2022 to 2024 will be RMB 350 million, RMB 500 million and RMB 690 million respectively, and the corresponding PE will be 15x, 11x and 8x respectively, maintaining the “Buy-A” rating.
Risk warning: the price of civil explosive raw materials rises; The delivery of rail transit orders is less than expected; The development of military new materials business was less than expected.
