\u3000\u3 China Vanke Co.Ltd(000002) 025 Guizhou Space Appliance Co.Ltd(002025) )
Event:
On April 11, 2022, the company released its annual report for 2021: the revenue was 5.038 billion yuan, a year-on-year increase of 19.43%, the net profit attributable to the parent was 487 million yuan, a year-on-year increase of 12.37%, and the net profit not attributable to the parent was 455 million yuan, a year-on-year increase of 13.25%.
Comments:
1) focus on the main business to drive the steady growth of revenue, and the high prosperity of the industry is expected to continue to release demand. The company is mainly engaged in high-end connectors, micro motors, high-end relays, optical communication devices (photoelectric modules) and other product businesses, of which more than 70% of the products are supplied to customers in aerospace, aviation and other high-end fields, especially in the aerospace field. In 2021, the company focused on its main business, and the two main businesses of connector and motor achieved rapid growth. Combined with the high demand for aerospace equipment in the 14th five year plan, the company achieved a revenue of 5.038 billion yuan, a year-on-year increase of 19.43%, and the net profit attributable to the parent company was 487 million yuan, a year-on-year increase of 12.37%. During the 14th Five Year Plan period, the aerospace special equipment will show a high boom driven by multiple factors. The company is expected to achieve prosperous production and marketing by virtue of product advantages and fund-raising projects.
2) the fluctuation of raw materials leads to a slight decrease in gross profit rate, and the improvement of scale effect is expected to strengthen the profitability. The gross profit margin of the company in 2021 was 32.62%, with a year-on-year decrease of 1.37pct, mainly due to the rise in the price of raw materials during the reporting period. The company's Q1 ~ Q4 gross profit margin was 35.26% / 33.37% / 33.49% / 28.93% respectively, of which the gross profit margin decreased significantly in the fourth quarter, or mainly due to the less delivery of high value-added products in that quarter. The company's net profit margin on sales in 2021 was 11.21%, a year-on-year decrease of 0.85pct, of which the net profit margin in the fourth quarter was 8.51%, which was mainly due to the asset impairment loss of 42 million yuan and the R & D expense of 203 million yuan. During 2021, the expense ratio of the company was 19.91%, a year-on-year decrease of 1.17pct, mainly due to the increase of the scale effect of the company, which led to the decrease of 0.89pct in the sales expense ratio and 0.18pct in the financial expense ratio due to the increase of interest income. We expect that with the gradual stabilization of raw material prices, the emergence of product scale effect and the increase of the proportion of military products, the company's profitability will stabilize and recover, and the impact of asset impairment loss will be gradually reversed.
3) inventory and contract liabilities increased significantly, orders on hand were abundant and goods were prepared and arranged in an orderly manner. The ending inventory of the company was 994 million yuan, an increase of 58.97% over the beginning of the year, and the raw materials and products in process increased by 29.41% and 56.08% respectively over the beginning of the year. We believe that the company is actively purchasing and preparing goods for side-by-side production, actively digesting orders in hand and further strengthening the performance expectation of this year. In addition, the goods issued reached 276 million yuan, an increase of 210.29% over the beginning of the period, much higher than the revenue growth rate of 19% in the whole year. We believe that it is due to the unrecognized revenue of some delivered goods, which is expected to be gradually cashed in the subsequent statements. The company's contractual liabilities at the end of the period amounted to 327 million yuan, an increase of 662.83% over the beginning of the year, including an increase of 242 million in the fourth quarter, fully reflecting the current high downstream demand boom. According to the announcement, 99.5% of the contract liabilities are within one year, and the delivery and cashing cycle is short, which effectively supports the expectation of future performance. In addition, with the improvement of the collection efficiency of loans and the proportion of downstream prepayments, the net cash flow from operating activities during the reporting period reached 833 million. At present, the company has full orders in hand. With the gradual promotion of raising investment and production expansion projects, the existing orders are expected to achieve steady delivery and fully increase the performance of 2022.
4) in 2022, the related sales are expected to increase by 48%, and raising investment and expanding production is expected to break the capacity bottleneck. According to the announcement, the amount of commodities sold to Aerospace Science and industry group is expected to be about 1.6 billion yuan in 2022, with a year-on-year increase of 48%, reflecting the high demand for downstream missiles. In addition, the company raised 1.431 billion yuan through private placement in September 2021, of which 830 million yuan was used to invest in four capacity expansion projects, and the annual sales revenue will increase by 2.36 billion yuan, up to 47% of the sales revenue in 2021. We believe that the expected substantial growth of related sales and the promotion of raising investment and production expansion fully reflect our previous certainty in the high-profile judgment of the military industry, especially in the missile field, and the subsequent prosperity.
The advantages of missile borne connectors and micro and special motors are prominent, and the core benefits from the high prosperity in the aerospace field. More than 70% of the company's products are sold to high-end customers in aerospace, aviation and other fields. Military products basically cover all military equipment fields, and the proportion is expected to increase again. The company's connector product business accounts for a high proportion, accounting for 66% of its revenue in 2021. The company has the largest market share in the aerospace field. We have pointed out in many reports that the aerospace special equipment will show a high boom driven by multiple factors. With the high boom in the field of aerospace equipment, the company will benefit from this process by virtue of its product advantages; The company's micro and special motor products account for more than 20% of its revenue. They are widely used in missile steering gear, underwater weapon steering gear and seeker servo mechanism. In addition, the aerospace business accounts for a higher proportion and also benefits from missile power supply, Missile Telemetry and other products.
Civil products in the field of communication have expanded rapidly, benefiting from the construction of 5g base stations and domestic replacement of connectors for a long time. The company has accelerated the expansion of new businesses such as optical transmission, high-speed interconnection and new energy interconnection. The proportion of business in the field of communication in civil products is considerable, which has decreased in the short term or affected by the epidemic and China US relations. The company produces 5g base station connectors for international and Chinese mainstream communication equipment manufacturers, which may benefit from the promotion of 5g base station construction for a long time; In addition, the company has a complete range of connector products, including high-speed connectors, which benefit from domestic substitution opportunities under the trend of self-control. Obtained the exclusive development qualification of key high-speed coding of an international communication equipment giant, and changed the passive situation of the company supporting a single product (power supply) in the communication market.
Investment suggestion: driven by multiple backgrounds, the field of aerospace products is expected to show a high outlook. The company's connector products rank first in the market share of aerospace and missile borne connectors, with outstanding advantages and core benefits; The development of civil products has potential. In the short term or affected by the epidemic and China US relations, it will benefit from the construction of 5g base stations and the domestic substitution of components in the long term. It is estimated that the net profit from 2022 to 2024 will be RMB 680 million, RMB 890 million and RMB 1.16 billion, corresponding to the valuations of 36x, 28x and 21x. The company has good growth certainty in the military industry sector, and the valuation matches the performance. It can pay long-term attention, continue to recommend and maintain the "Buy-A" rating.
Risk warning: the progress of weapons and equipment assembly is less than expected, the failure or delay of space launch mission affects the company's military products business, and the progress of production expansion is less than expected.
