\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 137 Ningbo Boway Alloy Material Co.Ltd(601137) )
Event: on April 18, 2021, the company released its 2021 annual report, realizing an operating revenue of 10.038 billion, a year-on-year increase of 32.27%, and a net profit attributable to the parent company of 310 million, a year-on-year decrease of 27.66%.
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The revenue increased by 32% year-on-year, the new material business grew significantly, and the loss of new energy business is expected to narrow. In 2021, the company realized a total operating revenue of 10.038 billion yuan, a year-on-year increase of 32.27%, and the net profit attributable to the parent company was 310 million yuan, a year-on-year decrease of 27.66%. The increase in revenue was mainly due to the increase in sales volume of new materials and the simultaneous rise in product prices caused by the rise in the price of metal raw materials such as copper; The decrease in net profit was mainly due to the recent expansion of the loss of the company’s international new energy business. In 2021, the company’s China business revenue was 6.51 billion, a year-on-year increase of 41.50%, accounting for 64.85% of the company’s operating revenue, which was higher than that in previous periods; The operating income of international business was 3.331 billion yuan, with a year-on-year increase of only 14.71%, which was far lower than the growth rate of the company’s overall operating income, mainly due to the significant reduction of new energy business in the company’s international business.
New materials business: the annual operating revenue was 9.073 billion yuan, a year-on-year increase of 49.76%, and the sales volume totaled 180800 tons, a year-on-year increase of 16.06%. Among them, the sales volume of alloy sector and strip business increased by 27.12% to 35000 tons year-on-year, the operating revenue increased by 73.47% year-on-year, and the net profit increased by 63.46% year-on-year, mainly due to the significant increase in the sales volume of high value-added products driven by the gradual production expansion projects; The sales volume of alloy rod and wire rod business increased by 11.53% year-on-year, the operating revenue increased by 37.31% year-on-year, and the net profit increased by 46.36% year-on-year, mainly due to the increase in the sales volume of high value-added products in the fields of transportation equipment, engineering machinery, mineral equipment, energy equipment and key parts of new energy vehicles; The sales volume of precision filament business increased by 27.45% year-on-year, the operating revenue increased by 63.08% year-on-year, and the net profit increased by 1.90% year-on-year. The profit growth rate was significantly lower than the revenue growth rate, mainly due to the reduction of processing fees in order to improve the market share.
New energy business: the annual operating income was 7673843 million yuan, a year-on-year decrease of 46.92%, and the net loss was -803512 million yuan, a year-on-year decrease of 152.66%. It is mainly due to the sharp rise in sea freight, the surge in the price of raw materials such as silicon and the tariff imposed by the United States on double-sided components caused by the global epidemic during the reporting period. In November 2021, the US Court of international trade announced the restoration of tariff exemption for double-sided component 201. We expect that the restoration of tax policy will effectively improve the revenue and profit performance of the company’s new energy business in the future.
Fluctuations in raw materials affect profit performance, and R & D investment continues to grow at a high rate. During the reporting period, the gross profit margin of the company’s sales was 12.28%, a year-on-year decrease of 4.78pct, and the net profit margin of sales was 3.09%, a year-on-year decrease of 2.56pct, mainly due to the sharp rise in the price of raw materials. During the period, the expense rate was 8.74%, a year-on-year decrease of 1.94 PCT. Except for the increase of R & D expense rate of 0.34 PCT, the other expense rates decreased. Among them, the management expenses increased by 14.97% year-on-year, mainly due to the increase in the amortization of salary and share based payment expenses after the company introduced the digital project implementation team; Financial non use increased by 26.95% year-on-year, mainly due to the increase of working capital required after the rise of raw material prices, resulting in the increase of loans; R & D expenses increased by 48.67% year-on-year, mainly due to the company’s further increase in R & D investment during the reporting period. The company pays attention to technology research and development. In the past four years, the growth rate of the company’s R & D expenses is higher than that of its revenue. The continuous R & D investment is expected to help the company further consolidate its technical advantages and speed up the catch-up process to international leaders.
Inventories and contractual liabilities increased significantly year-on-year, and the release performance of future delivery can be expected. By the end of the reporting period, the company’s inventory had reached 3.329 billion yuan, with a year-on-year increase of 67.35%, and showed a continuous growth trend in the four quarters of the year, mainly due to the rise in the price of raw materials in the new material business and the increase in stock reserves driven by production demand. Among them, in-process products and inventory goods increased by 83.05% and 77.32% respectively compared with the beginning of the period. It is expected that with the production and delivery of relevant products, the company’s performance may be further thickened. The company’s contractual liabilities at the end of the period reached 734 million, a year-on-year increase of 180.71% compared with the beginning of the period, which is mainly due to the increase in the ending prepayment of overseas customers of the new energy business in the current period, which further supports the expectation of the improvement of the performance of the company’s new energy business in 2022.
Production expansion projects continue to be promoted, and capacity improvement opens up long-term growth space. In order to cope with the growing market demand, the company arranged the production expansion and technical transformation of its main business in advance, and the production capacity is expected to be significantly improved in the future. During the reporting period: 1) the 50000 ton special alloy strip project of the company has entered the trial production stage of the whole line at the end of October 2021, and the downstream certification of the automotive electronic material production line is expected to be completed by the end of June this year and gradually start mass supply; 2) The 6700 ton aluminum welding wire project is mainly used in the high-speed railway industry and is currently in the stage of certification and trial production; 3) Among the 31800 ton special alloy rod and wire project of beikenhoff Vietnam plant, the wire project is expected to enter the trial production and marketing stage in the first half of this year, while the bar project is still in the state of equipment installation and commissioning. 4) Alumina dispersed copper project has entered the trial production stage, and some products are supplied in small quantities; (5) The special material project for intelligent terminal lens has completed the installation and commissioning of the production line and the testing of benchmark customers. Mass production will begin after obtaining international patents. With the completion and operation of the above related production expansion projects, we expect that the total production capacity of the company’s new materials is expected to increase from 180000 tons at the end of 2021 to 270000 tons in the next two years, laying a foundation for the company’s long-term performance growth.
Investment suggestion: with technological breakthroughs in high-end application fields and complete product system, the company will fully benefit from the downstream high-profile and localization substitution demand in the future. The gradual implementation of production expansion projects will also ensure that the company’s production capacity will fully meet the future market demand. It is estimated that the net profit of the company from 2022 to 2024 will be RMB 610 million, RMB 770 million and RMB 920 million respectively, corresponding to 16, 13 and 10 times of the valuation, maintaining the rating of “overweight-a”.
Risk warning: the price of upstream raw materials continues to rise; The production expansion progress of new materials is less than expected; Downstream demand growth was less than expected.
