\u3000\u3 Shengda Resources Co.Ltd(000603) 337 Jack Sewing Machine Co.Ltd(603337) )
On April 22, the company released the first quarterly report of 2022. In 22q1, the revenue was 1.821 billion yuan, a year-on-year increase of + 3.91%, and the net profit attributable to the parent was 191 million yuan, a year-on-year increase of + 37.43%, deducting 187 million yuan of non attributable net profit, a year-on-year increase of + 38.65%.
The revenue of the industry maintained growth during the downward period, and there is room for improvement in the share of overseas markets. 21q1 was the peak demand for sewing machines in China in the last round. Previously, the China Sewing Machinery Association released an article predicting that the domestic sales of China’s industrial sewing equipment will decline by 25-30% under the epidemic situation and product cycle law in 2022. Under the high base of 21q1 revenue + 79% year-on-year, the company’s 22q1 revenue still increased. It is speculated that on the one hand, the demand of overseas market remained high, on the other hand, the company’s market share continued to increase. According to our calculation, the market share of the company in the overseas market is only about 12%, which still has a large room for improvement compared with nearly 40% in China.
The net interest rate increased month on month, and the profitability continued to repair. In 22q1, the company achieved a gross profit margin of 26.17% and a net profit margin of 10.72%, with a year-on-year increase of 3.35 and 2.67 PCT respectively, and a net profit margin of 1.45 PCT month on month increase compared with Q4. Since December 21, the company’s product price has increased, further transmitting the rising pressure of upstream raw materials to the downstream. In terms of expense rate, the company’s sales, management and financial expense rates were + 0.56, + 0.08 and + 0.58pct respectively year-on-year. The increase in financial expenses was mainly due to the increase in loans, and the R & D expense rate was + 1.39pct year-on-year. It is speculated that the R & D investment in intelligent complete set business increased, while the credit impairment loss decreased, mainly due to the decrease in the impairment of accounts receivable.
The inventory has been digested, and the short-term impact of the epidemic is small. At the end of the year, the company’s inventory was about 2.2 billion, an increase of 122% over the beginning of the year, including 990000 sets of industrial sewing machines, a record high, mainly because the company expects the overseas market to continue to improve in 2022 and prepares some strategic reserves in advance. 22q1 company’s inventory decreased to 1.85 billion yuan, a month on month decrease of 16%, which is expected to be continuously digested through the adjustment of production rhythm in the future. Since March, the epidemic situation in Shanghai and its surrounding areas has continued, which has an impact on the transportation links of the surrounding manufacturing industry. At the same time, the prices of bulk commodities such as steel have fluctuated and increased. Under the high inventory level, these two short-term disturbance factors have relatively little impact on the production and operation of the company.
Investment suggestion: we are optimistic about the continuous development of the overseas market of sewing in the past 22 years. At the same time, the potential of the company’s intelligent complete set business is worth looking forward to. Maintaining the previous judgment on the performance of the company for 22-23 years, it is expected that the net profit attributable to the parent company from 2022 to 2024 will be RMB 722 million, RMB 951 million and RMB 1.285 billion respectively, corresponding to 13, 10 and 7 times of PE under the current share price, which is at the bottom of history and maintains the “buy” rating.
Risk tips: 1. The overseas demand for repair is less than expected due to repeated outbreaks; 2. The expansion of intelligent complete equipment is less than expected; 3. Raw material prices rose more than expected.
