\u3000\u3 Shengda Resources Co.Ltd(000603) 556 Hexing Electrical Co.Ltd(603556) )
Key investment points
Overseas dragged down 21 years of revenue and profits, and the performance of 22q1 exceeded expectations
In 2021, the company's revenue decreased by 4.09% year-on-year, mainly due to the impact of the epidemic in the overseas market. The overseas revenue was 1.627 billion yuan, a year-on-year decrease of 9.13%; China's revenue was 1.031 billion yuan, a year-on-year increase of 4.06%. In 2021, the company's gross profit margin was 32.76%, with a year-on-year decrease of 8.69pct, mainly due to the increase of raw materials and logistics costs. In Q1 2022, the company's performance improved significantly, with revenue of 668 million yuan, a year-on-year increase of 45.75%, net profit attributable to parent company of 140 million yuan, a year-on-year increase of 211.97%, and gross profit margin of 1.5pct to 34.8%.
Greater flexibility in overseas business deployment and benefit from greater flexibility in the use of electricity in emerging markets
In 2021, the company's electricity business achieved revenue of 2.312 billion yuan, a year-on-year decrease of 9.11%, mainly due to the slowdown in the demand for smart meters in the United States and Western European developed countries. The company is the earliest and largest exporter of China's own brand smart meters. In the future, it will benefit from the strong demand of developing countries such as Brazil and the popularity of smart meters in the African continent, with great overseas business potential. In China, benefiting from the replacement cycle of stock smart meters, the performance of the company's future power business is more flexible.
Distribution business and new energy products have developed rapidly and have accumulated certain advantages
In 2021, the company's distribution business realized a revenue of 315 million yuan, a year-on-year increase of 36.21%. During the 14th Five Year Plan period, the total investment in the distribution network of the two networks will reach 1.5 trillion yuan, and the distribution network will usher in great development opportunities. The company has continued to deepen its efforts in distribution automation, and the shares of a series of core products, such as primary and secondary integration, column circuit breaker / ring network cabinet (box), distribution terminal FTU / DTU / TTU, have continued to increase. In 2021, the company's revenue from new energy products was 30.96 million yuan, with a year-on-year increase of 387.89%. The company has the independent and controllable ability of distributed energy core equipment such as inverter, energy storage battery and Microgrid control system.
Profit forecast and valuation
The company is a global supplier of smart meters and smart power distribution products. Considering the possibility of slowing down the progress of overseas projects, we carefully lowered the profit forecast. It is estimated that the net profit attributable to the parent company in 22-23 years will be 529 million yuan and 675 million yuan respectively (714 million yuan and 871 million yuan respectively before the reduction). The new 24-year profit forecast is estimated that the net profit attributable to the parent company in 24 years will be 804 million yuan, corresponding to EPS of 1.08, 1.38 and 1.65 yuan / share in 22-24 years, The PE corresponding to the current share price is 10.5, 8.2 and 6.9 times respectively. Considering that the deployment of smart grid in overseas emerging markets will be further strengthened, the company's business will benefit directly and maintain the "buy" rating.
Risk warning: the construction progress of smart grid is less than expected; New product development was less than expected.
