\u3000\u3 Bohai Water Industry Co.Ltd(000605) 099 Cocreation Grass Co Ltd(605099) )
Event: Cocreation Grass Co Ltd(605099) released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company realized an operating revenue of 2.302 billion yuan, a year-on-year increase of 24.39%; The net profit attributable to the parent company was 380 million yuan, a year-on-year decrease of 7.45%; The net profit attributable to the parent company after deduction was 355 million yuan, a year-on-year decrease of 7.53%. In 2021q4, the company realized an operating revenue of 553 million yuan, a year-on-year increase of 9.01%; The net profit attributable to the parent company was 60 million yuan, a year-on-year decrease of 38.33%; The net profit attributable to the parent company after deducting non-profit was 57 million yuan, a year-on-year decrease of 36.26%.
In addition, in the first quarter of 2022, the company achieved an operating revenue of 681 million yuan, a year-on-year increase of 27.78%; The net profit attributable to the parent company was 85 million yuan, a year-on-year decrease of 13.80%; The net profit attributable to the parent company after deducting non-profit was 82 million yuan, a year-on-year decrease of 14.82%.
Grasp the development opportunities of the global leisure grass Market and accelerate the expansion of overseas business. According to the products, 1) in 2021, the income of leisure grass was 1.647 billion yuan, with a year-on-year increase of 31.62%, mainly due to the increase in the demand for household consumer leisure lawn. The company actively grasped the opportunity of the growth of the overseas market demand for leisure grass products, and opened its own flagship stores on mainstream e-commerce platforms such as tmall, jd.com and xiaohongshu to accelerate the expansion of online channels. 2) In 2021, sports grass achieved a revenue of 527 million yuan, with a year-on-year increase of 2.08%. With the gradual recovery of the global economy, after the release of isolation and economic restart in European and American countries, the demand for sports grass products curbed by covid-19 epidemic began to rebound, and the sports grass products in the international market increased by 7.51% year-on-year. 3) In 2021, straw silk and other products achieved revenue of 128 million yuan respectively, with a year-on-year increase of 54.38%, mainly due to the rapid growth of straw silk and diversified business.
In terms of subregions, 1) in 2021, China’s market realized a revenue of 284 million yuan, a year-on-year decrease of 6.73%, of which China’s sports grass decreased by 4.29% year-on-year, mainly due to the repeated epidemic situation in China in the second half of 2021 and the delayed demand for sports grass. 2) In 2021, the international market realized a revenue of 2.017 billion yuan, a year-on-year increase of 30.54%, mainly driven by the demand for leisure grass in Europe and the Americas. The leisure grass in the international market increased by 31.78% year-on-year.
Direct selling + wholesale bind global major customers and steadily promote the production capacity layout. In terms of sales channels, the company adopts the mode of direct selling + wholesale to build a global sales network. 1) In terms of direct selling mode, the company directly sells sports grass products with large-scale regional sports ground pavers in various countries, and has become one of the eight preferred global artificial turf suppliers of FIFA (FIFA). 2) In terms of wholesale mode, based on the extremely scattered end customers of leisure grass, the company mainly connects with major global and regional artificial lawn wholesalers, large chain home building materials supermarkets and other customers to establish long-term and stable cooperative relations. As of December 31, 2021, the company has 235 sales personnel, and its products are exported to more than 120 countries and regions such as America, Europe, Asia and Oceania. According to amiconsulting data, according to the statistics of sales volume, the company’s global market share reached 15.00% in 2019, making it the largest artificial lawn enterprise in the world in terms of production and sales.
In terms of production capacity, as of December 31, 2021, the company has an annual production capacity of 11 million square meters of artificial turf. At the same time, the company has started the investment and expansion of Vietnam co creation production base project in July 2021. It is expected that after the project is completed and put into operation, it can achieve an annual production capacity of 50 million square meters of artificial turf, which is expected to further consolidate the leading position of the company.
The rise in the price of raw materials put short-term pressure on profits. During this period, the expenses were well controlled. In the past 21 years, the company’s comprehensive gross profit margin was 27.90%, down 9.02pct year-on-year, mainly due to the rise in the price of raw materials and shipping prices. 22q1 company’s comprehensive gross profit margin was 24.09%, down 7.25 PCT year-on-year.
In terms of period expenses, the company’s period expense rate in 21 years was 11.15%, a year-on-year decrease of 2.32pct, and the sales / management / R & D / financial expense rates were 4.09% / 3.73% / 3.23% / 0.09% respectively, with a year-on-year decrease of -0.08 / – 0.56 / + 0.07 / – 1.76pct respectively. 22q1 company’s expense rate during the period was 9.96%, with a year-on-year decrease of 0.75pct. The sales / management / R & D / financial expense rate was 3.73% / 3.53% / 2.64% / 0.06% respectively, with a year-on-year increase of -0.29 / – 0.69 / – 0.86 / + 1.10pct respectively. Among them, the increase of financial expense rate was caused by the change of exchange rate. Under the comprehensive influence, the net interest rate of the company in 21 years was 16.52%, down 5.69pct year-on-year; 22q1’s net profit margin was 12.52%, down 6.04pct year-on-year.
Investment suggestion: the company has been deeply engaged in the field of artificial turf for many years, with multi-dimensional leadership in technology, brand and channel, and short-term profits are under pressure. However, relying on the capacity release of Vietnam phase II base and the recovery of overseas market demand, the company’s performance is still expected to continue to grow steadily. We estimate that the operating revenue of Cocreation Grass Co Ltd(605099) 20222024 will be RMB 2.911 billion, RMB 3.552 billion and RMB 4.427 billion, with a year-on-year increase of 26.47%, 22.02% and 24.63%; The net profit attributable to the parent company was 517 million yuan, 703 million yuan and 893 million yuan, with a year-on-year increase of 35.95%, 35.98% and 27.03%. The corresponding PE was 19.4x, 14.3x and 11.2x, and the investment rating of Buy-A was given.
Risk warning: risk of sharp fluctuations in raw material prices and exchange rates; The risk of intensified industry competition; Market expansion is less than expected risk.
