\u3000\u30 Shenzhen Fountain Corporation(000005) 19 North Industries Group Red Arrow Co.Ltd(000519) )
Event overview: the company released its 2021 annual report on April 18. During the reporting period, the company achieved a total operating revenue of 7.514 billion yuan, a year-on-year increase of + 16.26%; The net profit attributable to the parent company was 485 million yuan, a year-on-year increase of + 76.77%; The operating cash flow was 1.573 billion yuan, a slight decrease over the same period; Realize basic eps0 35 yuan. Among them, Q4 achieved a total operating revenue of 2.665 billion yuan in a single quarter, a year-on-year increase of + 4.04%; The net profit attributable to the parent company was -121 million yuan, a year-on-year increase of -121.27%; The company’s performance in 2021 basically conforms to the previous forecast.
In 2021, the revenue increased steadily by + 16.26% year-on-year, and the contract liabilities increased by + 199.29% year-on-year. In 2021, the company’s revenue increased by + 16.26% year-on-year to RMB 7.514 billion, maintaining a stable growth; In terms of business, superhard materials and their products were + 25.21% to 2.407 billion yuan, special vehicles were – 5.52% to 398 million yuan, auto parts were + 5.04% to 320 million yuan, and special equipment was + 15.05% to 4.388 billion yuan year-on-year; In addition, it is worth noting that the company’s contract liabilities reached 945 million yuan at the end of 2021, a significant year-on-year increase of 199.29% compared with 316 million yuan at the end of 20. It is optimistic that the revenue will continue to grow steadily in 2022.
Driven by the optimization of income structure, the profitability was significantly improved, and the net interest rate attributable to the parent company was + 2.21pct year-on-year. Benefiting from the optimization of product structure driven by the rise of diamond industry, the profitability of the company was significantly enhanced in 2021. The net profit attributable to the parent company was + 95.78% to 471 million yuan year-on-year, and the gross profit margin was + 3.16pct to 20.74% year-on-year. The expense rate during the period was basically flat year-on-year, driving the net profit margin to + 2.21pct to 6.46% year-on-year. In the fourth quarter alone, or affected by the settlement rhythm of special equipment business, the net loss in the single quarter was -121 million yuan, which expanded year-on-year, which dragged down the overall performance of the company in the whole year to a certain extent.
The net profit of Zhongnan diamond is 657 million yuan, and it continues to be optimistic about the prospect of cultivating diamond + industrial diamond. In 2021, the net profit of the subsidiary Zhongnan diamond increased by + 60.18% year-on-year to RMB 657 million, mainly benefiting from the following high demand for cultivated diamonds and the continuous price increase of industrial diamonds under the mismatch of supply and demand. Since 2022, the cultivation diamond industry has continued to maintain high economic growth. In March, brands including Mclon Jewellery Co.Ltd(300945) , Zhou Shengsheng successively announced to join the cultivation diamond retail, which may effectively drive the further improvement of penetration rate. At the same time, due to the extrusion effect of production capacity and the pulling effect of photovoltaic and other industries, the prospect of industrial diamond price rise is promising. Therefore, driven by the cultivation of diamond + industrial diamond, Zhongnan diamond is expected to continue to contribute performance flexibility to the company in 2022.
The automobile sector has basically turned losses into profits by reducing costs and increasing efficiency, and the profit inflection point of special equipment is worth looking forward to. By taking a series of cost reduction and efficiency increase measures, the company’s automobile sector has basically turned losses into profits. Therefore, the current drag on the performance is still mainly the special equipment sector. The subsidiary North Hongyang has a net loss of 243 million yuan in 2021. We believe that the current international situation is still unstable. The actual combat exercise will drive the consumption of intelligent ammunition to increase. With the gradual implementation of the reform of the new pricing mechanism, the company is expected to usher in a profit turning point of the special equipment business.
Investment suggestion: it is estimated that the company will realize revenue of 9.164 billion yuan, 11.140 billion yuan and 13.437 billion yuan respectively from 2022 to 2024, with a year-on-year increase of + 22.0%, + 21.6% and + 20.6%; The net profit attributable to the parent company was 1.035 billion yuan, 1.408 billion yuan and 1.769 billion yuan respectively, with a year-on-year increase of + 113.3%, + 36.0% and + 25.6%; Realize eps0 74, 1.01 and 1.27 yuan. The closing price of PE on April 18 was 28, 21 and 16 times respectively, maintaining the “recommended” rating.
Risk tip: the industry demand is lower than expected, the price of raw materials rises sharply, and the competition pattern intensifies.
