\u3000\u30 Shaanxi Zhongtian Rocket Technology Co.Ltd(003009) 79 Huali Industrial Group Company Limited(300979) )
Event: in 2022q1, the company realized revenue of 4.124 billion yuan, an increase of 11.39%, net profit attributable to parent company of 648 million yuan, an increase of 12.40%, deduction of non net profit of 638 million yuan, an increase of 10.24% and EPS of 0.56 yuan. Excluding the impact of exchange rate fluctuations, the company’s revenue increased by 14.13% and the net profit attributable to the parent company increased by 15.16% in 2022q1. Affected by covid-19 epidemic, the attendance and operating rate of employees in the company’s factory in northern Vietnam decreased, affecting the growth of short-term income.
Comments:
The orders of head customers increased year-on-year, and the volume and price of sports shoes increased simultaneously. The company has maintained close cooperation with key brand customers, maintained rapid growth in global demand for sports shoes, and promoted the continuous growth of orders and revenue of head customers. In 2022q1, the top five customers of the company achieved revenue of US $250 million, US $134 million, US $102 million, US $74 million and US $35 million, an increase of 23.09%, 14.72%, 12.82%, 0.73% and 53.17% respectively. Nike, VF and other brands increased the share of sports shoes purchased by the company. In 2022q1, the sales volume of sports shoes of the company was 511368 million pairs, an increase of 7.09% at the same time, and the average price was 80.65 yuan / pair, an increase of 4.02% at the same time. The simultaneous rise of volume and price promoted the rapid growth of revenue.
The gross profit margin decreased year-on-year, the expense rate decreased, and the net operating cash flow decreased. 1) In 2022q1, the gross profit margin of the company decreased by 3.69pct to 25.65%, mainly due to the decline of attendance and operating rate of the company caused by covid-19 epidemic, and the relatively low efficiency in the early stage of new plant operation. 2) The company’s R & D expenses, PCT and management expenses increased by – 1.080%, pct-2020080%, and the company’s basic exchange rate decreased by – 1.080%, pct-2020080%, pct-2020083%. 3) In 2022q1, the net operating cash flow of the company was 377 million yuan, a decrease of 11.51%, mainly due to the increase in cash paid for purchasing goods and receiving labor services.
The company’s attendance rate returned to normal, and the acquisition of related party assets promoted capacity expansion. In 2022, Vietnam’s covid-19 epidemic prevention and control gradually matured, factories around the country resumed production in an orderly manner, and sports OEM orders in Europe and the United States continued to transfer to Vietnam. As the leader of sports shoes OEM, the company’s customer orders have increased rapidly, and the income growth is expected to pick up after the attendance rate of factory employees returns to normal. In April 2022, the company announced the acquisition of its land use rights, office buildings and other buildings and ancillary facilities in Vietnam’s Qinghua province from related parties at a transaction price of 111376 million yuan, which is convenient for the expansion of production capacity in northern Vietnam. In addition, the company also built a large-scale production base in Indonesia.
Profit forecast and investment suggestions: we maintain the company’s EPS forecast of 2.98/3.56/3.97 yuan from 2022 to 2024, and the current share price corresponds to 22.62 times PE in 22 years. We are optimistic about the long-term growth of sports shoes and clothing track. As the leader of sports shoes OEM, the company has obvious advantages, strong certainty of performance growth, large long-term development space and maintains the “buy” rating.
Risk factors: concentrated production areas, rising labor costs, and the spread of covid-19 pneumonia in Vietnam.
