Fulongma ( Fujian Longma Environmental Sanitation Equipment Co.Ltd(603686) )
Event: Recently, the company released its 2021 annual report. In 2021, the company achieved an operating revenue of 5.702 billion yuan, a year-on-year increase of 4.75%; The net profit attributable to the owners of the parent company was 340 million yuan, a year-on-year decrease of 23.13%. The basic earnings per share is 0.82 yuan.
Comments:
The demand of the sanitation industry fell, and the price rise of raw materials put pressure on the performance. In 2021, the company realized a revenue of 5.702 billion yuan, with a year-on-year increase of 4.75%. Quarterly, the growth rates of Q1-Q4 were 31.52%, 1.66%, – 1.70% and – 4.72% respectively. Affected by the decline of industry demand, the company’s revenue decreased quarter by quarter. On the profit side, the net profit attributable to the parent company was 340 million yuan in 2021, with a decrease of 23.13%, the gross profit margin was 21.42%, a year-on-year decrease of 5.68 PCT, the net profit margin was 6.0%, and a year-on-year decrease of 2.1 PCT, mainly due to the rise in the price of raw materials, the loss of credit impairment and the cancellation of preferential tax policies. When the demand of the sanitation market fell, the cash flow decreased, but the overall return remained good. In 2021, the proportion of cash received from the company’s sales of goods and services in the revenue fell to 88.39% year-on-year.
The revenue of environmental sanitation equipment business declined and the market share increased. In 2021, the company’s environmental sanitation equipment business revenue was 2.114 billion yuan, with a decrease of 1.01% and a gross profit margin of 19.31%, with a decrease of 6.4pct. The epidemic affected the tightening of financial expenditure. In 2021, the national general public budget expenditure was 24.57 trillion, an increase of 2.90%, of which the expenditure on energy conservation and environmental protection and urban and rural communities were 633.3 billion yuan and 1994.6 billion yuan respectively, a year-on-year decrease of 14.30% and 19.90% respectively. In 2021, the total sales volume of sanitation vehicles in China was 102800, with a year-on-year decrease of 12.09%. It is estimated that the market share of sanitation equipment of the company is about 5.91%, with a year-on-year increase of 0.42pct. It ranks among the top three in the industry and has a stable competitive position.
The business of new energy and sanitation equipment declined, benefiting from the electrification trend of the industry for a long time. In 2021, the revenue of the company’s new energy sanitation equipment was 172 million yuan, down 48.27% at the same time, accounting for 8.16% of the equipment business, accounting for 6.55% of the market, down 2.24 PCT at the same time, still maintaining the top three in the industry; The gross profit margin was 20.26%, down 13.43pct. In the middle of 2021, the sales volume of Shanxi Guoxin Energy Corporation Limited(600617) sanitation vehicles was 4104, an increase of 5.50% at the same time, accounting for 3.99% of the total sales volume of sanitation vehicles, and the penetration rate increased year-on-year. Although the industry is still in the initial stage of new energy, the policy driven electrification process will move forward steadily. In 2020, the State Council issued the new energy vehicle industry development plan (20212035). It is planned that the sales of new energy vehicles will account for 20% of the total sales by 2025, and the public sector will be fully electrified by 2035. We believe that in the long run, the company’s sanitation equipment business will benefit from the trend of electrification.
The sanitation service business maintained growth, and the newly signed orders decreased slightly year-on-year. In 2021, the company’s environmental sanitation service revenue was 3.381 billion yuan, an increase of 11.68% and a gross profit margin of 23.29%, a decrease of 2.46 PCT. Throughout the year, the company added 60 winning sanitation service projects, with an annual amount of 635 million yuan in the first year, a decrease of 3.64% and a total contract amount of 2.915 billion yuan, an increase of 19.86%. By the end of 2021, the annualized contract amount of environmental sanitation service projects performed by the company was 3.751 billion yuan, a year-on-year increase of 11.40%. Affected by industry policies, government changes and other factors, the growth rate of the sanitation service industry slowed down in 2021. The annualized amount of newly signed contracts was 71.6 billion yuan, an increase of 4.37% and the total contract amount was 216.3 billion yuan, a decrease of 2.13%. The market share of newly signed annualized amount of the company was 0.9%, ranking eighth in the industry and ninth in the industry. With the continuous advancement of the marketization of sanitation services, the scale of the sanitation service market is expected to maintain rapid growth, and the company’s sanitation service business will benefit from the marketization trend for a long time.
Profit forecast and investment rating: we estimate that the net profit attributable to the parent company from 2022 to 2024 will be 421 million yuan, 514 million yuan and 626 million yuan respectively, and the corresponding EPS will be 1.01 yuan / share, 1.24 yuan / share and 1.51 yuan / share respectively, corresponding to 11 times, 9 times and 7 times of the current share price PE respectively. We believe that with the recovery of industry demand, the company’s valuation is expected to repair upward and maintain the company’s “buy” rating.
Risk factors: changes in economic environment and policies, exchange rate fluctuations, repeated epidemics and other sudden and disastrous events, intensified market competition, raw material price fluctuations, etc.
