\u3000\u30 Shaanxi Zhongtian Rocket Technology Co.Ltd(003009) 79 Huali Industrial Group Company Limited(300979) )
Key investment points
Performance summary: the company released its performance in 2021. In 21 years, it achieved a revenue of 17.47 billion yuan, a year-on-year increase of 25.4% (excluding the impact of exchange rate fluctuations, a year-on-year increase of 34.1%), and a net profit attributable to the parent company of 2.77 billion yuan, a year-on-year increase of 47.3% (excluding the impact of exchange rate, a year-on-year increase of 57.6%); Among them, Q4 revenue / net profit attributable to the parent company were 4.84 billion yuan / 770 million yuan respectively, with a year-on-year increase of 33.5% / 37.4% respectively, and the growth rate picked up.
The gross profit margin increased year-on-year, and the cost control continued to be optimized. The gross profit margin in 21 years was 27.2%, with a year-on-year increase of 3.4pp, mainly driven by the improvement of scale effect after capacity expansion and the optimization of customer and product structure. On a quarterly basis, the gross profit margin of Q1 / Q2 / Q3 / Q4 in 21 years was 29.3% / 28.1% / 26.5% / 25.6% respectively. The decline of Q3 gross profit margin was mainly affected by the epidemic situation in Vietnam, and Q4 was affected by the adjustment of customs declaration expenses from sales expenses to costs. By category, the gross profit margins of sports and leisure shoes / outdoor boots / sports sandals, slippers and others are 28.9% (+ 3.4pp) / 18.7% (+ 1.5pp) / 20.5% (+ 4.9pp) respectively. In terms of expense rate, the total expense rate in 21 years reached 5.4% (- 1.3pp), of which the sales expense rate / management expense rate / financial expense rate / R & D expense rate were 0.4% (- 1pp) / 3.9% (- 0.3pp) / – 0.3% (- 0.7pp) / + 1.3% (- 0.2pp) respectively. Benefiting from the increase of gross profit margin and the decrease of superimposed expense rate, the company’s net profit margin increased by 2.4pp to 15.8% year-on-year.
Sports and leisure are the main force of growth, and the core customers are growing brightly. In terms of products, the company’s sports and leisure shoes / outdoor boots / sports sandals, slippers and other / other businesses contributed revenue of 14.22 billion yuan (+ 25.9%) / 1.58 billion yuan (+ 6.2%) / 1.64 billion yuan (+ 46.6%) / 0.40 billion yuan (- 2.7%), accounting for 81.4% / 9.1% / 9.4% / 0.2% respectively. The main business sports and leisure shoes continued to grow rapidly, contributing 82.7% to the growth of total revenue; By region, the United States / Europe / other regions contributed revenue of 15.2 billion yuan (+ 24.5%) / 2.05 billion yuan (+ 27.1%) / 190 million yuan (+ 160.3%), accounting for 87% / 11.7% / 1.1% respectively. In the past 21 years, the company’s top five customers contributed a total revenue of 16.01 billion yuan, accounting for 91.7% of the total revenue, of which Nike / Deckers / VF / puma / UA contributed 6.18 billion yuan (+ 44%) / 3.76 billion yuan (+ 58%) / 3.21 billion yuan (+ 13%) / 1.89 billion yuan (+ 26%) / 960 million yuan (+ 45%), accounting for 35.4% / 21.5% / 18.4% / 10.8% / 5.5% of the revenue respectively. In addition to the strong orders of core customers, the orders of the company’s new customers ASICs, onrunning and new balance have also been mass produced and shipped, which will contribute new impetus to the continuous growth of performance in the future.
The production capacity continues to expand and become the second largest sports shoe manufacturer in the world. In response to the strong demand of customers for sports shoes, the company continues to expand its production capacity. In the past 21 years, the company’s three new factories have been put into operation and quickly realized the ramp up of production capacity. The total production capacity has increased to 220 million pairs, with a year-on-year increase of 21.2%, becoming the world’s second largest sports shoe manufacturer after Yuyuan group. At the same time, the capacity utilization rate / production and sales rate has reached 95.9% (+ 5pp) / 100.6% (+ 1.3pp), and the demand is strong. At present, the company has sufficient capacity reserves. In 22 years, it is expected that the phase I plant in Indonesia will also be put into operation, and its future performance will continue to benefit from capacity improvement.
Profit forecast and investment suggestions. It is estimated that the company’s EPS from 2022 to 2024 will be 3.01 yuan, 3.7 yuan and 4.46 yuan respectively, and the corresponding PE will be 25 times, 20 times and 17 times respectively. Considering that the company is deeply bound to the high growth track of sports shoes and significant competitive barriers, the company is given a valuation of 30 times in 22 years, the target price is 90.3 yuan, and a “buy” rating is given for the first time.
Risk warning: the risk of fluctuation of capacity utilization affected by the epidemic situation; The risk that the growth of new customers is less than expected; Risk of exchange rate fluctuations.
