\u3000\u3 China Vanke Co.Ltd(000002) 560 Henan Tong-Da Cable Co.Ltd(002560) )
Event 1: the company released its annual report for 2021. In 2021, the company achieved a revenue of 2.355 billion yuan, a year-on-year increase of 22.13%, a net profit attributable to the parent of 24 million yuan, a year-on-year decrease of 80.39%, and a deduction of non attributable net profit of 18 million yuan, a year-on-year decrease of 77.80%. The company released the first quarterly report of 2022: in 2022q1, the company achieved a revenue of 1.025 billion yuan, a year-on-year increase of 150.44%, a net profit attributable to the parent of 12 million yuan, a year-on-year decrease of 36.93%, and a deduction of non attributable net profit of 09.8 million yuan, a year-on-year decrease of 41.40%.
Event 2: on April 2, the company issued an announcement on the revision of the draft employee stock ownership plan: the company plans to distribute 1200880 shares to 8 people including Shi Jiabao, accounting for about 0.23% of the total share capital of the company on the announcement date. The unlocking conditions are that the company’s revenue will achieve a 50% growth rate in 2022 and individuals will pass the performance appraisal.
The rise in the price of raw materials suppressed profits, and the revenue growth accelerated in 2022q1. On the revenue side, the company achieved a revenue of 2.355 billion yuan in 2021, with a year-on-year increase of 22.13%, and the revenue achieved steady growth. In 2022q1, the company achieved a revenue of 1.025 billion yuan, a year-on-year increase of 150.44%, mainly due to the year-on-year increase in the revenue of its subsidiary Chengdu Hangfei and the increase in the scope of merger, and the subsidiary Tongda new materials. On the profit side, the company realized a net profit attributable to the parent company of 24 million yuan in 2021, a year-on-year decrease of 80.39%, a net profit deducted from the non parent company of 18 million yuan, a year-on-year decrease of 77.8%, a net profit attributable to the parent company of 12 million yuan in 2022q1, a year-on-year decrease of 36.93%, and a net profit deducted from the non parent company of 09.8 million yuan, a year-on-year decrease of 41.4%. Affected by the macroeconomic environment, the prices of bulk commodities such as copper and aluminum, the main raw materials of the company’s cable business (accounting for 93.36% of revenue in 2021), rose sharply to an all-time high. Although the company hedged, it was unable to fully hedge the erosion of profit caused by price rise. In terms of profit margin, the company’s gross profit margin in 2021 was 10.27%, down 5.37pct from the same period last year. In terms of business, the gross profit margin of wire and cable business was 7.14% (down 6.3pct year-on-year), and the gross profit margin of aviation and medical parts processing business was 54.26% (down 4.62pct year-on-year).
In 2022q1, the level of expense rate improved, and the R & D investment continued to grow. In 2021, the company’s three expenses accounted for 4.95% (year-on-year + 1.13pct), of which the sales expense rate, management expense rate and financial expense rate were 1.33% (year-on-year + 0.47pct), 2.63% (year-on-year + 0.64pct) and 0.99% (year-on-year + 0.01pct) respectively. The company’s three expenses in 2022q1 accounted for 3.57% (year-on-year -1.22pct), of which the sales expense rate, management expense rate and financial expense rate were 0.86% (year-on-year -0.33pct), 1.66% (year-on-year -1.39pct) and 1.05% (year-on-year + 0.50PCT). Compared with 2021, the company’s expense rate during 2022q1 was greatly improved. In terms of R & D, the company’s R & D expenses in 2021 were 86 million yuan, a year-on-year increase of 34.02%. In 2022q1, the R & D expenditure was 21 million yuan, with a year-on-year increase of 9.94%. Under the condition of poor macro economy, the company continued to strengthen R & D revenue and enhance its core competitiveness. The operating cash flow of the company in 2021 was -165 million yuan, which was mainly affected by the rise in the price of raw materials and other factors. The cash paid by the company for purchasing goods and receiving labor services reached 2.447 billion yuan, an increase of 588 million yuan over last year, resulting in a sharp decline in cash flow.
The volume of advanced military aircraft has accelerated, and the company’s aviation parts business has grown rapidly. The subsidiary Chengdu Hangfei’s products cover a variety of major military models and civil models such as COMAC C919 and c929. In 2021, Chengdu Hangfei achieved a revenue of 156 million yuan, a year-on-year increase of 40.71%, accounting for 6.61% of the revenue. Among them, the revenue of military products was 143 million yuan, with a year-on-year increase of 41.19%. Benefiting from the accelerated volume of advanced military aircraft, the company’s aviation parts business continued to maintain rapid growth.
Continuously improve the incentive mechanism and fully mobilize the enthusiasm of core employees. In order to fully mobilize the enthusiasm of the company’s management and core employees and promote the long-term stable and healthy development of the company, the company has formulated an employee stock ownership plan. The unlocking conditions are that the company’s operating revenue in 2022 will increase by 50% or more (reaching 3.533 billion yuan) compared with 2021 and personal assessment. The improvement of incentive mechanism is conducive to the sustainable and stable development of the company.
Investment suggestion: Tongda new materials, a newly merged subsidiary of the company, raised the company’s revenue forecast. The sharp rise in the price of raw materials suppressed the company’s profit, and we lowered the company’s profit forecast. It is estimated that the company’s revenue from 2022 to 2024 will be RMB 4.064/44.69/4.863 billion respectively (25.05/29.06 before 20222023), the net profit attributable to the parent company will be RMB 0.72/1.22/181 million respectively (0.99/1.52 before 20222023), the corresponding EPS will be RMB 0.14, RMB 0.23 and RMB 0.34 respectively, and the corresponding PE will be 37.1x, 21.8x and 14.7x respectively, maintaining the “overweight” rating.
Risk prompt event: military orders are less than expected; Risk of price rise of raw materials; The profit forecast is lower than expected.
