\u3000\u30 Chongqing Baiya Sanitary Products Co.Ltd(003006) 95 Zhejiang Zhaofeng Mechanical And Electronic Co.Ltd(300695) )
Event overview: on April 20, 2022, the company released the annual report of 2021. The annual revenue of the company reached 718 million yuan, a year-on-year increase of + 52.88%; The net profit attributable to the parent company was 126 million yuan, a year-on-year increase of – 21.10%. Among them, the revenue of 21q4 reached 238 million yuan, a year-on-year increase of + 98.47%; The net profit attributable to the parent company was 36 million yuan, a year-on-year increase of + 15.25%.
China’s OEM market accelerated development, boosting the revenue of 21 years by 52.88% year-on-year. In 2021, the company’s revenue increased by 52.88% year-on-year, mainly due to: 1) the company vigorously explored the Chinese OEM market. In 21 years, the sales volume in China reached 2.1635 million pieces, with a strong year-on-year increase of 144.05%, the revenue was 313 million yuan (accounting for 43.64% of the overall revenue, with a year-on-year increase of + 21.05 PCT), with a year-on-year increase of + 195.34%, and the sales unit price reached 144.90 yuan / piece, with a year-on-year increase of + 21.02%. The Chinese market development strategy has achieved initial results, and the volume and price have risen simultaneously. At, The products have been supplied to many vehicle manufacturers such as Chang’an and BAIC cross-country. The project cooperation with some Chinese new energy vehicle manufacturers and pickup truck manufacturers has entered the fixed-point stage, and has obtained the fixed-point notice of the core project of a large vehicle manufacturer in China, and the product power has been further verified; 2) The overseas market was further consolidated and the market scale continued to grow. In 21 years, the overseas sales volume reached 3.3713 million pieces, with a year-on-year increase of + 24.61%, the revenue was 405 million yuan, with a year-on-year increase of + 11.31%, and the sales unit price reached 120.08 yuan / piece, with a year-on-year increase of – 10.68%. The company dug deep into existing customers and actively explored emerging market businesses in Southeast Asia and the Middle East. Under the adverse environment of repeated covid-19 epidemic in the world, the overseas business continued to grow and the customer structure was further optimized.
The product structure was optimized and the cost control continued to be strengthened. In 2021, the company’s comprehensive gross profit margin was 29.7%, with a year-on-year increase of -15.72 PCT, mainly due to: 1) the gross profit margin of hub bearing unit (accounting for 78.33% of revenue, with a year-on-year increase of -17.30 PCT) was 36.15%, with a year-on-year increase of -9.63 PCT, and the rising price of raw materials put pressure on the business profit space of this sector; 2) The gross profit margin of heavy axle parts (revenue accounting for 10.71%) is – 9.94%. The negative gross profit margin is due to the low prosperity of China’s heavy truck industry, which inhibits the terminal demand, resulting in the non release of the company’s production capacity, the high fixed cost and the rise in the price of upstream raw materials. The company responded positively, adjusted the business layout of Shaanqi Zhaofeng, vigorously expanded the new energy electric vehicle bridge business (revenue accounted for 4.60%), reduced the impact of the commercial vehicle market, and continuously optimized the product structure. In 2021, the company’s four fee expense rate was 10.84%, with a year-on-year rate of -0.99pct. The margin continued to improve and the ability of expense control continued to enhance, helping the company reduce costs and increase efficiency.
Expand categories and expand the market. Driven by two wheels, the company has entered a new round of high growth period. Product side: Based on the technical advantages of hub bearing, the company continues to expand new product categories. The company has established a joint venture with Shaanxi Automobile Group to accelerate the market development of new energy electric vehicle bridges, strengthen cooperation with Chery commercial vehicles and other vehicle enterprises, and quickly enter the field of new energy. Market side: on the premise of deep cultivation in the automotive aftermarket of developed countries such as North America, the company has strengthened the development of the front mounted OEM market. Based on the AM market and the OEM market as the main growth point, the new business of bearing pre-sales + after-sales continues to drive the company’s revenue into a new round of high growth period.
Investment suggestion: the company’s new business starts in large quantities. We expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 249 / 320 / 406 million respectively, and the current market value corresponds to 13 / 10 / 8 times of PE from 2022 to 2024. As a leader in China’s hub bearing industry, the company is expected to enjoy a valuation premium and maintain the “recommended” rating.
Risk tip: the price fluctuation of raw materials leads to low gross profit margin, and the expansion of new products is less than expected.
