\u3000\u30003 Eternal Asia Supply Chain Management Ltd(002183) 00218)
The company released the performance of 2022q1. During the period, the revenue was 484 million yuan (+ 9.44%), the net profit attributable to the parent was 169 million yuan (+ 512.3%), and the net profit attributable to the parent was 13 million yuan (- 52.81%). The difference between the two is mainly due to the completion of the collection and storage handover of Jinzhai Road plant area during the reporting period and the confirmation of the net income from asset disposal of about 159 million yuan
The epidemic affected short-term sales, and customer cooperation continued to deepen. During the period, the revenue increased by 9.44%, of which the output was + 1.6%, while the sales volume decreased by about 2.62%, mainly due to the upgrading of sealing and control under the outbreak of epidemic in all parts of China, which affected short-term delivery. However, with the continuous realization of the company’s high-quality key customer strategy, the sales unit price still increased year-on-year. Although disturbed by the epidemic in the short term, the company continues to invest in product research and development, deepen cooperation with existing customers such as apple and Ashely, and actively promote cooperation with incremental customers such as Nike, Byd Company Limited(002594) , Toyota and so on. In addition, the production capacity is optimized. It is planned to upgrade and transform four ecological functional polyurethane synthetic leather production lines (with a production capacity of 18 million meters / year). At the same time, two production lines in Vietnam have been installed and will be put into operation in 2022h1. We expect that with the improvement of the epidemic and the release of new production capacity, the subsequent growth is expected to accelerate.
Under the epidemic situation, the transmission of raw material price rise lags behind, affecting short-term profitability. The gross profit margin in the first quarter was 18.36%, down 5.32 PCTs year-on-year. On the one hand, the price transmission lagged behind due to the obvious rise in the prices of raw materials (+ about 20-40%) and energy (winter natural gas + 28%) during the reporting period. On the other hand, affected by the current epidemic and weak demand, the price adjustment range of some customers is less than the cost increase. In terms of expenses, during the period, the sales expense ratio / management expense ratio was 2.78% / 3.37% respectively, with a decrease of -0.2 / – 0.45pcts respectively. During the period, the company still actively invested in R & D, and the R & D expense ratio increased by 1.55pcts to 7.7%. On the whole, the net interest rate after deduction was 2.69% (- 3.63 PCTs), but the overall net interest rate increased to 37.1% due to the net income from self-produced disposal during the period of about 159 million yuan.
Healthy cash flow and stable operation. At the end of the first quarter, the company’s inventory was 500 million yuan, slightly higher than that at the end of 2021. We expect it to be mainly caused by delivery delay. In the same period, the inventory turnover days were 153.53 days (+ 16.87 days), and the accounts receivable turnover days were 4.88 days (+ 5.01 days). In addition, the net cash flow from operating activities was 30.24 million yuan (+ 147%), maintaining a healthy level.
Investment suggestion: the company is the global leader in ecological functional PU leather. Based on research and development, the company will compete in the foreign-funded high-end PU leather market and enter the stage of large-scale production of key customers. With high gross profit margin, large number of customers and superimposed scale effect, the company has entered the development channel of high growth and high quality. In the short term, due to the impact of the epidemic in China and shipping, some orders of customers in 2022h1 may be delayed (such as Chivas and Ashley). At the same time, the price of upstream raw materials increases significantly, and the short-term gross profit margin is expected to be under pressure. At the same time, the company’s asset sales revenue is about 159 million yuan. Comprehensively, we expect the net profit attributable to the parent company to be 330 / 259 / 324 million yuan in 2022 / 23 / 24, with a year-on-year increase of 150.5% / – 21.7% / 25.5%, The corresponding valuations are 8 / 10 / 8 times respectively. If the one-time asset disposal income is not considered, the net profit in 2022 will be 1.71, and the net profit in 2022 / 23 will increase by 29.5% and 51.5% respectively, maintaining the “buy” rating.
Risk warning: risk of large fluctuation of raw materials and natural gas; The epidemic situation in Southeast Asia affects the production progress of Vietnam; The demand of downstream customers decreased. The public materials used in the research report may have the risk of information lag or untimely update.
