Hangzhou Honghua Digital Technology Stock Company Ltd(688789) ( Hangzhou Honghua Digital Technology Stock Company Ltd(688789) ) event
On April 28, the company received a notice from Mr. Jin Xiaotuan, the chairman and actual controller. Based on his confidence in the future development of the company and his recognition of the long-term investment value of the company, the company plans to increase its shares in the company by means permitted by the trading system of Shanghai Stock Exchange within three months from May 5, 2022, with a total increase of no less than 20 million yuan and no more than 40 million yuan, The price of this increase shall not exceed 170 yuan / share.
Key investment points
Performance meets expectations; In 2021, the revenue increased by 32% year-on-year; Net profit attributable to parent company increased by 33% year on year
The chairman’s increase in holdings shows confidence, and the growth path of equipment + consumables + downstream applications (digital textile flexible fast reverse supply chain) is clear. In 2021, the company’s revenue was 940 million yuan, a year-on-year increase of 32%; The net profit was 230 million yuan, a year-on-year increase of 33%, and the performance was in line with expectations. Q4 revenue in 2021 was 240 million yuan, a year-on-year decrease of 13%; The net profit was 65.33 million yuan, flat year-on-year. Q4 single quarter net interest rate was 27%, with a year-on-year increase of 3.7pct and a month on month increase of 5pct.
Power and production restrictions and the aggravation of overseas epidemic affect Q4 income, and the change of product structure improves Q4 net interest rate
In 2021, Q4 revenue decreased by 13% year-on-year. We judged that: 1) due to the impact of Q4 power and production restriction last year, downstream customers were underemployed; 2) The overseas epidemic worsened and some customers delayed the acceptance of equipment, which together led to a year-on-year decrease in revenue; In 2021, Q4 net profit margin increased significantly year-on-year and month on month. We judge that it may be due to the increase in the proportion of direct injection machine and active ink revenue with high gross profit margin.
The “equipment + ink” model is excellent, and the proportion of ink revenue has increased by 6%, forming the basis of long-term growth
In 2020, the company’s equipment revenue was 450 million and ink revenue was about 200 million; In 2021, the company’s equipment revenue was 540 million and ink revenue was 320 million, an increase of 62% year-on-year. The proportion of ink revenue will increase from 28% in 2020 to 34% in 2021, and it is expected to increase to more than 40% by 2025. In the long run, with the continuous increase of equipment stock, the proportion of ink revenue with consumables will exceed that of equipment, which constitutes the basis for the long-term and stable growth of the company.
Digital jet printing technology has strong universality, and its application can be extended to book printing, printing and dyeing, packaging and building materials
The core of digital jet printing technology lies in pattern data processing, precise jet motion control and the adaptability between nozzle and ink. It has certain universality in the field of pattern printing. With the progress of technology, its application field will no longer be limited to the production of printed cloth, and is expected to be further extended to different fields such as monochrome printing and dyeing, book printing, packaging printing and building materials. The company has mastered the core technology of digital jet printing, and there is room for further improvement in its future development.
Profit forecast and valuation
It is estimated that the net profit attributable to the parent company from 2022 to 2023 will be RMB 350 / 470 / 650 million, with a year-on-year increase of 52% / 37% / 38% and PE of 33 / 24 / 18 times. Optimistic about the company’s global leading edge in the field of medium and high-end digital inkjet printing equipment and the unique business model of “equipment + consumables”. Maintain the “buy” rating.
Risk tips: 1) risk of relying on outsourcing of core components; 2) Bad debts caused by rapid growth of receivables
