\u3000\u3 China Vanke Co.Ltd(000002) 494 Huasi Holding Company Limited(002494) )
Key investment points
The whole link layout of fur industry is the leader. The company is a fur manufacturing leader integrating the complete industrial chain of “raw materials, processing, design, production and sales”. At the same time, it also has Suning international fur trading center, fur town (international fur city, fur e-commerce Incubation Park) and other service platforms to transfer and lease real estate. In 2021, the main business of fur / other income accounted for 43.01% / 56.99%. After listing in 2010, the company’s performance grew steadily. Affected by the weak demand of the fur industry since 2015, the overall revenue showed a downward trend. In 2020, the revenue affected by the epidemic fell by 29.14%. Due to the suspension of operation of the company’s Danish farm due to the epidemic, a large number of breeding minks were culled, resulting in a loss in net profit due to the provision of large asset impairment loss. In 2021, the performance improved under the low base, and the revenue increased by 22.74% / compared with – 13.03% in 2019 The net profit attributable to the parent company turned loss into profit, with an increase of 105.03% / compared with 2019 + 3.14%. The net profit increased significantly, mainly due to the recovery of gross profit margin and the sharp decrease of asset and credit impairment loss of 257 million yuan.
The main fur industry continued to be under pressure due to weak demand. The company’s main fur business is mainly OEM, and ODM / OBM / OEM accounted for 55.78% / 41.42% / 2.80% respectively in 2021. In the early stage, it was mainly export. Due to the decline of the payment capacity of some overseas customers and the gross profit margin lower than China, the company gradually shifted its business focus to China, and domestic sales / export accounted for 88.82% / 11.18% in 2021. Affected by the weak demand, the revenue growth of the company’s main fur industry slowed down after its listing in 2010 and began to decline in 2014. Due to the impact of the epidemic, the revenue decreased by 27.69% in 2020 and continued to decline by 24.90% in 2021. The capacity utilization rate in the past two years was low, 42.10% and 29.98% respectively. Due to the overall culling of Danish mink in 2020, there is a bottleneck in the supply of raw materials in the industry. The book value of semi-finished products and raw materials of the company in 2021 is 391 million yuan, and the production raw materials are sufficient. It is expected to benefit from the improvement of industry concentration caused by the elimination of small production capacity.
Platform transfer and leasing business has regional advantages, with significant growth in 2021. Other business income mainly comes from the transfer and rental income of shops in the company’s raw material trading center and fur town. It is adjacent to xiong’an new area and has regional advantages. Since the opening of the upstream and downstream extension layout in 2013, the growth has increased significantly, but the uncertainty of transfer income has led to fluctuations in the growth rate, which reached 135.45% in 2021. The company continues to promote the construction of new projects in Huasi fur Town, and has established e-commerce Incubation Park (basic transfer), Huasi international fur city (transfer + lease), etc. at present, the project in the east of the town is still under construction.
The gross profit margin remained basically stable, and large asset impairment losses affected the performance of short-term net profit. The gross profit margin of the company is basically stable in the range of 25-30%. In 2020, the gross profit margin fell to negative value due to the de inventory through low price and negative gross profit sales, but it has recovered to 27.87% in 2021. In recent years, the net interest rate of the company has been basically in the range of 2-4%. In 2017, due to the unfavorable investment in e-commerce platform YouSHE technology and business integration in the future, a large amount of impairment provision was made, and in 2020, a large amount of asset impairment loss was made due to the comprehensive culling of overseas minks, resulting in the negative net interest rate in the above two years. In the future, with the change of accounting estimates, the pressure on the profit side is expected to be relieved.
Profit forecast and investment rating: in recent years, the demand of fur industry has been weak and the epidemic has led to the limited supply of raw materials. In the future, with the fashion of fur products, the industry demand is expected to improve. The company is a leader in the fur industry. In recent years, its main business performance has been under pressure, with a loss in net profit in 20 years and a recovery on the basis of low base in 21 years. We expect that the net profit attributable to the parent company from 2022 to 2024 will increase by 10.15% / 12.33% / 15.33% year-on-year respectively, and the EPS will be 0.05/0.06/0.06 yuan / share respectively, and the corresponding PE will be 93 / 83 / 72x respectively. The valuation is high, and the “neutral” rating will be given for the first coverage.
Risk tip: the epidemic has repeatedly affected consumption, weak demand in the leather industry and fluctuations in raw material prices
