\u3000\u3 Shengda Resources Co.Ltd(000603) 337 Jack Sewing Machine Co.Ltd(603337) )
Event: the company released the first quarterly report of 2022, realizing revenue of 1.821 billion, yoy + 3.91%; Net profit attributable to parent company: 191 million, yoy + 37.43%; Net cash flow from operating activities was – 340 million, yoy-281.59%.
Core view: performance exceeds expectations. Under the background of high base, the company’s revenue has achieved positive growth, mainly due to the gradual recovery of overseas market and the increase of revenue share. The profitability of the company continues to be repaired, mainly because the price rise in the early stage is fully reflected in the statements, and it is expected to maintain a high profitability in the future. In 2022, we will pay attention to the development of the company’s export business and intelligent complete set business. ① Export: in the early stage of overseas market recovery, the company actively deployed personnel and strengthened the construction of overseas marketing network, which is conducive to the company to seize the opportunities of export market and improve the income scale and brand influence. ② Intelligent complete set business: entering the critical period of market introduction, the company actively connects with potential customers at home and abroad. It is expected to develop rapidly and become a new growth point of performance in the future.
The performance exceeded expectations and the overseas market gradually recovered
Performance exceeded expectations. Under the background of Q1 high base in 2021, the company achieved positive growth on the revenue side and rapid growth on the profit side, mainly due to the gradual recovery of the overseas market and the significant increase in the proportion of overseas revenue. The net cash flow of the company’s operating activities is negative, mainly due to: ① in order to encourage dealers, the company implements the sales policy of credit at the beginning of the year and recovery at the end of the year; ② With the development of key customers, the proportion of income settled according to the accounting period increases; ③ In order to cope with the increasingly strong overseas demand and high raw material prices, the company produces and prepares goods in advance. The short-term cash flow pressure does not affect the company’s daily operation, and helps the company develop customers, deal with the risk of raw material price rise and seize overseas market opportunities.
Profitability continues to repair and is expected to maintain a high level in the future
In Q1, the company achieved a gross profit margin of 26.17% (up 3.35pct year-on-year, down 2.78pct month on month) and a net profit margin of 10.72% (up 2.67pct year-on-year, up 1.45pct month on month). This is mainly due to the three price increases in 2021, which are fully reflected in the statements. It is expected to maintain a high profit level in the future. The company’s expense rate during the period was 13.17%, with a year-on-year increase of 2.61pct, still maintaining a low level. The sales expense rate was 3.51%, with a year-on-year increase of 0.56pct, mainly due to the company’s increasing the construction of marketing network; The management expense ratio was 4.01%, with a year-on-year increase of 0.08pct; The R & D expense ratio was 5.19%, with a year-on-year increase of 1.39 PCT, mainly due to the company’s increased R & D investment; The financial expense ratio was 0.46%, with a year-on-year increase of 0.57pct, mainly due to the increase of bank financing.
The strategy is clear and steady to promote the development of export and intelligent complete set business
Export: actively carry out personnel allocation and overseas marketing network construction, and seize the opportunity of overseas demand recovery. On the one hand, actively develop overseas business and send personnel abroad to actively feed back the dynamics of the company; On the other hand, increase the number of overseas dealers and improve the construction of overseas marketing network, so as to lay the foundation for expanding the scale of revenue and enhancing the influence of brand. Intelligent complete set: parallel at home and abroad, entering the critical period of market introduction. Hangzhou model factory has been running smoothly, which has played a benchmarking role in the development of this business. While maintaining expanded customers, the company continues to connect with potential customers outside China. It is expected that the customer group of complete sets of equipment can be completed in 2022 and 2023. At present, the market is in a critical period of introduction.
Investment suggestion: we expect the company to achieve revenue of RMB 7.011 billion, RMB 8.424 billion and RMB 10.518 billion respectively from 2022 to 2024, yoy + 15.82%, 20.16% and 24.85%; Net profit of 670, 826 and 1052 million yuan, yoy + 43.62%, 23.32% and 27.32%; Corresponding PE is 13.0, 10.6 and 8.3x; The six-month target price is 30 yuan, which is equivalent to the corresponding 20x valuation in 2022.
Risk tip: the global economic growth has fallen sharply, the international situation remains tense, and the recovery of overseas demand is less than expected; The epidemic situation repeatedly affects demand; The promotion of complete sets of equipment is not as expected; The penetration rate of automatic sewing equipment is lower than expected.
