\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 061 Hhc Changzhou Corp(301061) )
Event: Hhc Changzhou Corp(301061) released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company realized an operating revenue of 1.925 billion yuan, a year-on-year increase of 46.04%; The net profit attributable to the parent company was 298 million yuan, a year-on-year increase of 45.15%; The net profit attributable to the parent company after deducting non profits was 298 million yuan, with a year-on-year increase of 50.49%. In 2021q4, the company realized an operating revenue of 435 million yuan, a year-on-year decrease of 1.92%; The net profit attributable to the parent company was 62 million yuan, with a year-on-year increase of 21.27%; The net profit attributable to the parent company after deduction was 63 million yuan, with a year-on-year increase of 28.32%.
In addition, in 2022q1, the company realized an operating revenue of 462 million yuan, a year-on-year increase of 1.06%; The net profit attributable to the parent company was 70 million yuan, a year-on-year decrease of 15.78%; The net profit attributable to the parent company after deducting non-profit was 62 million yuan, a year-on-year decrease of 25.30%.
In the past 21 years, it has increased revenue and profits, focused on the U.S. market, and the intelligent electric sofa has increased significantly
Although the production and delivery of 21q3-4 were affected by the epidemic in Vietnam, power rationing in China, port congestion in the United States and limited international logistics, the company still achieved an operating revenue of 1.925 billion yuan in 2021, with a year-on-year increase of 46.04%; The net profit attributable to the parent company was 298 million yuan, with a year-on-year increase of 45.15%, and the profit and income increased in the same proportion. Under the comprehensive influence of inflation in the United States, rising deposit interest rates, weakening demand and excessive inventory of furniture retailers, 2022q1 company realized an operating revenue of 462 million yuan, a year-on-year increase of 1.06%; The net profit attributable to the parent company was 70 million yuan, a year-on-year decrease of 15.78%. In terms of products, in 2021, the company's intelligent electric sofa achieved a revenue of 1.342 billion yuan, a year-on-year increase of 73.74%, and the proportion of revenue increased from 58.61% in 2020 to 69.73%; The income of intelligent electric bed reached 257 million yuan, a year-on-year decrease of 4.56%, and the proportion of income decreased from 20.46% in 2020 to 13.37%; The revenue of accessories business was RMB 284 million, with a year-on-year increase of 16.14%, and the proportion of revenue decreased to 14.74% from 18.53% in 2020. The company's largest core product - intelligent electric sofa has increased significantly, mainly because the company has focused on developing and promoting multi seat sofa since 2020, and a large number of leather materials have been selected, which has a significant effect on increasing income. Among them, the income of multi seat sofa increased by 138.46% year-on-year in 2021. The company's smart electric bed revenue has decreased, mainly because most of its customers are furniture retailers. The sales and promotion of independent brand products has a long cycle and slow effect, and the operating rate is insufficient due to the epidemic in Vietnam.
In terms of market, in 2021, the company's export market realized a revenue of 1.881 billion yuan, a year-on-year increase of 46.51%, and the proportion of revenue remained at about 98%; The domestic market realized a revenue of 44.088 million yuan, a year-on-year increase of 2.60%, accounting for about 2.29%. The company has always focused on the U.S. market and maintained its focus on major customers and products. In 2021, the company achieved a revenue of 1.68 billion yuan in the U.S. market, with a year-on-year increase of 43.43%, accounting for 87.65% of its main business revenue. The company has developed 13 new customers throughout the year, including 10 customers, including Costco and miskelly's furniture, whose headquarters are in the United States.
In terms of profitability, the company's comprehensive gross profit margin in 2021 was 28.78%, down 6.67pct year-on-year; 22q1 company's comprehensive gross profit margin was 27.32%, down 2.06pct year-on-year. The gross profit margin declined in the short term, mainly due to the sharp rise in the price of raw materials. Under the comprehensive influence, the overall net profit rate of the company in 21 years was 15.50%, with a year-on-year decrease of 0.10pct; The overall net interest rate of 22q1 was 15.24%, down 3.05pct year-on-year.
In terms of period expenses, the company's period expense rate in 2021 was 10.71%, a year-on-year decrease of 7.21pct; The ratio of sales / management / R & D / financial expenses in 2021 was 2.22% / 7.95% / 0.55% / 4.87% respectively, with a year-on-year decrease of 4.92pct/0.12pct/2.13pct/0.54pct respectively.
The company continued to increase its investment in technology R & D. in 2021 and 22q1, the R & D expenditure of the company increased by 31.50% and 44.31% year-on-year, and the R & D expenditure rate reached 4.87% and 5.07% respectively. Adhering to the original design is the gene of the company. By the end of March 2022, the company had 394 domestic and foreign patents, including 11 invention patents, 111 utility model patents and 272 appearance patents.
In the blue ocean market of smart home, the demand for smart sofa and smart bed continues to rise, and China has great development potential
With the improvement of economic level and urbanization rate, the acceptance of smart home continues to improve with the superposition of consumption upgrading. Among them, sofa and bed are the core objects of living room and bedroom in the family. Functional sofa and intelligent electric bed are the representative products of smart home. According to ISPA (International Association of sleep products), the smart home market has developed rapidly. The market scale of global functional sofa and smart electric bed has increased from US $18.547 billion and US $1.649 billion in 2016 to US $24.473 billion and US $4.058 billion in 2020, with compound annual growth rates of 7.18% and 25.25% respectively. In 2020, the penetration rate of functional sofa in China was 5.5%, which is still low compared with 48.0% in the United States. The smart electric bed is still in the stage of market education, and there is great room to improve the penetration rate.
In August 2021, the company established a design and R & D team dedicated to the Chinese market in Foshan, Guangdong. Based on the consistent principles of "design first" and "product first", the company now focuses on new product design and development, product proofing, technical data storage and small batch production. In October 2021, the company set up ingenuity medical in Changzhou headquarters in Jiangsu Province to serve China's health care market. The first batch of products independently designed and developed include smart beds in health care institutions, multi position rehabilitation treatment beds, home care smart beds, etc; At the same time, it also actively explores cooperation with downstream customers such as Chinese pension apartments and rehabilitation hospitals, as well as Israeli research institutions.
Investment suggestion: Hhc Changzhou Corp(301061) continues to invest in R & D and innovation, with outstanding product power and strong stickiness of high-quality customers. The integrated layout of industrial chain helps the company maintain good profitability all the time. With the gradual launch of IPO raised and put into operation in the future and the continuous development of markets outside China, the company's performance is expected to continue to grow rapidly. We estimate that the operating revenue of Hhc Changzhou Corp(301061) 20222024 will be 2.365 billion yuan, 2.944 billion yuan and 3.693 billion yuan respectively, with a year-on-year increase of 22.85%, 24.48% and 25.48%; The net profit attributable to the parent company was 349 million yuan, 441 million yuan and 572 million yuan respectively, with a year-on-year increase of 16.87%, 26.45% and 29.79%, and the corresponding PE was 11.5x, 9.1x and 7.0x respectively. The investment rating of Buy-A was given.
Risk warning: industry competition intensifies the risk; The risk that the market development outside China is less than expected; Price fluctuation risk of raw materials; Global covid-19 epidemic recurrence risk, etc.
