\u3000\u3 Shengda Resources Co.Ltd(000603) 129 Zhejiang Cfmoto Power Co.Ltd(603129) )
Event overview
The company released the 2021 annual report and the first quarterly report of 2022: the annual revenue of 2021 was 7.86 billion yuan, a year-on-year increase of 73.7%, and the net profit attributable to the parent was 410 million yuan, a year-on-year increase of 12.8%; Among them, the revenue of 2021q4 was 2.17 billion yuan, a year-on-year increase of + 57.6%, a month on month increase of + 4.4%, and the net profit attributable to the parent company was 90 million yuan, a year-on-year increase of + 34.0%, a month on month increase of – 8.1%. In 2022q1, the revenue was 2.26 billion yuan, a year-on-year increase of + 44.9%, a month on month increase of + 4.1%, and the net profit attributable to the parent company was 110 million yuan, a year-on-year increase of + 10.2%, a month on month increase of + 15.4%.
Analysis and judgment:
High growth of revenue in 2021 disturbing factors affect profits
Revenue side: in 2021, the company’s medium and large displacement motorcycles and all terrain vehicles simultaneously ushered in rapid growth, and the sales volume reached 11.1151000 respectively, with a year-on-year increase of + 28.1% and + 126.1% respectively. Driven by this, the company achieved a revenue of 7.86 billion yuan in 2021, with a year-on-year increase of 73.7%; In the split quarter, the revenue of 2021q4 was 2.17 billion yuan, with a year-on-year increase of + 57.6% and a month on month increase of + 4.4%. The year-on-year increase was mainly driven by two and four rounds of export growth.
Profit side: in 2021, the company was simultaneously affected by multiple factors such as tariff increase, sea freight and raw material price rise, RMB appreciation against the US dollar (according to the company’s annual report, the freight and tariff in the company’s operating costs in 2021 reached 380 million and 190 million yuan respectively). The annual gross profit margin decreased by 7.8pct year-on-year, resulting in the annual net profit attributable to the parent company only increasing by 12.8% year-on-year, which is far lower than the growth rate of revenue. However, we expect that with the improvement of subsequent disturbance factors, The profit level of the company will have great room for improvement. In terms of the split quarter, the net profit attributable to the parent company in 2021q4 was RMB 90 million, with a year-on-year increase of + 34.0% and a month on month decrease of – 8.1%, basically in line with previous expectations. It is expected that the month on month decline will be mainly due to the continuous rise of sea freight and the increase of exchange gains and losses; The deduction of non return to parent is RMB 60 million, with a year-on-year increase of + 41.8% and a month-on-month increase of – 33.0%. It is expected that the non recurring income will mainly come from government subsidies and foreign exchange forward locking income.
Cash flow and accounts receivable: in 2021, the company’s cash flow from operating activities was 260 million yuan, with a year-on-year increase of – 65.9%, which was mainly affected by the significant increase in the scale of accounts receivable and inventory. Receivables amounted to 650 million yuan, a year-on-year increase of + 90.0%, reflecting the continuous positive trend of demand. Expense side: in 2021, the rates of sales, management, R & D and finance were 6.6%, 3.5%, 4.8% and 0.4% respectively, with a year-on-year increase of – 2.1pct, – 1.1pct, – 0.4pct and – 1.0pct respectively. The sharp growth of revenue led to the decline of R & D rates during the period and.
The performance of 22q1 is basically in line with expectations, and the disturbance factors are slowing down
Revenue side: 2022q1 company continued the high-speed growth trend, with revenue of 2.26 billion yuan, a year-on-year increase of + 44.9% and a month on month increase of + 4.1%, of which four rounds are expected to contribute to the main growth. According to the data of China Automobile Association, the year-on-year growth rate of the company’s motorcycle and all terrain vehicle sales from January to February 2022 was + 8.3% and + 19.1% respectively. If the Q1 revenue is pushed back, the year-on-year growth rate in March is expected to be 20% and 35% respectively.
Profit side: in 2022q1, the company realized a net profit attributable to the parent company of 110 million yuan, a year-on-year increase of + 10.2%, a month on month increase of + 15.4%, deducting non attributable to the parent company of 90 million yuan, a year-on-year increase of – 3.6%, a month on month increase of + 45.4%. The non recurring income mainly came from investment income and foreign exchange forward locking income. From the perspective of profit margin, the gross profit margin and net profit of 2022q1 company were 19.6% and 4.7% respectively, with a certain improvement trend of + 0.2pct and + 0.45pct respectively month on month. With the subsequent slowdown of disturbance factors, it is expected that there is still room for improvement: 1) at the tariff side, the company actively arranged the construction of overseas factories, and the Thai factory was put into operation at the end of 2021, and the production capacity climbed steadily; 2) On the freight side, according to the CCFI index, the sea freight has shown a downward trend since mid February.
Medium and large row motorcycles lead consumption upgrading, and two rounds of overseas have become a new growth point
Motorcycle sales volume and performance contribution have increased rapidly. Since 2020, the company has deeply explored the incremental field, and heavy-duty models continue to catalyze:
1) imitation race: 250sr continues to sell well. In 2022, 450sr will be launched to undertake the upgrading and replacement needs of the original 250sr owners. From the pre-sale situation, it is likely that the price will burst;
2) retro streetcar: 250cl-x and 700cl-x effectively complement the short board of the model pedigree;
3) adventure vehicle: domestic maximum displacement adv model 800mt, another popular model with large displacement;
4) public upgrade: the first domestic public upgrade model cf1250 improves the brand value and product price range of CFMOTO;
5) joint venture sector: joint venture with KTM to produce models of KTM and Husqvarna brands, forming a high, medium and low matching with CFMOTO brand.
Looking forward to 2022, the two rounds of spring breeze are expected to increase by about 27%, and the annual sales volume is 140000 +. The core focus is on two aspects:
1) domestic sales: the imitation race new car 450sr was launched for pre-sale in early April. It is expected to be on the market from the end of May to June. The maximum power is 37.0kw, the maximum speed is 190km / h, and the benchmark is the ninja400 in Kawasaki. It is expected to effectively undertake the upgrading and replacement needs of the original 250sr owners, probably becoming a popular model;
2) export: since 2021, after the four rounds of overseas market position has been gradually consolidated, the two rounds are also expected to expand to the overseas market. According to the data of China Automobile Association, the company’s exports of 250cc (including) and above increased by + 227% and + 229% year-on-year respectively in the whole year of 2021 and from January to February of 2022, gradually forming two rounds of overseas new growth poles.
The leading position of all terrain vehicle export is stable, and we will deeply explore the American market
The company is the first all terrain vehicle manufacturer in China and the seventh largest all terrain vehicle manufacturer in the world. It ranks first in market share in many European developed countries and has a solid leading position in export. In 2021, the company’s sales volume of all terrain vehicles reached 151000, with a year-on-year increase of 126.1%, realizing a revenue of 4.88 billion yuan, with a year-on-year increase of 117.0%, mainly due to the growth of the global four-wheel market catalyzed by the epidemic and the synchronous increase of the company’s market share in Europe and North America. We expect that the company’s market share in Europe and North America will increase to 30% and 5% respectively in 2021. The United States is the world’s largest all terrain vehicle market. In recent years, the company has concentrated resources to explore the American market. Looking forward to 2022, the company’s four rounds of exports to North America are still the largest potential growth point. Considering the low terminal inventory, the interest rate increase in North America is in line with expectations and the company’s North American channel development, we expect that the company’s North American market share can be increased to 10 +% in 2022, and the overall export of four rounds of the whole year is expected to achieve 220000 vehicles, with a year-on-year increase of 40 +%. The short-term profit side is affected by tariffs and shipping to a certain extent. It is expected to gradually improve from 2022q2:
1) due to the influence of the international situation on the tariff side, the uncertainty of exemption is strong. The company actively plans to build factories overseas. On December 1, 2021, the first ATV vehicle in the Thai factory was offline;
2) the impact of the global epidemic at the shipping end is slowing down, and it is expected to fall further from 2022q2. In the future, if the tariff is successfully exempted and considering the elasticity of freight decline, we expect to increase profits by 240 / 320 million yuan from 2022 to 2023 respectively.
Investment advice
The company’s medium and large displacement motorcycle business benefited from the launch of popular models and market expansion, and the sales volume continued to rise; Continuously strengthen the leading position in the U.S. export market; Zeeho Electric brand is complementary to CFMOTO brand according to the demand of scientific and technological travel. In view of the impact of short-term disturbance factors, the profit forecast is lowered. It is expected that the company’s revenue in 20222023 will be adjusted from 12.22/15.38 billion yuan to 12.12/15.17 billion yuan, and the net profit attributable to the parent company will be adjusted from 8.0/1.12 billion yuan to 7.2/1.04 billion yuan. The new revenue forecast in 2024 will be 19.1 billion yuan, and the net profit attributable to the parent company will be 1.44 billion yuan, corresponding to the closing price of 93.47 yuan / share on April 14, 2022. PE will be 19 / 14 / 10 times respectively, maintaining the “buy” rating.
Risk tips
The tightening of motorcycle ban and restriction policies has led to the decline of motorcycle demand in China; Foreign brands lead to intensified market competition; Sea freight and raw materials continued to rise.
