\u3000\u30 Shenzhen Quanxinhao Co.Ltd(000007) 33 China Zhenhua (Group) Science & Technology Co.Ltd(000733) )
Event: the company released its 2021 annual report and the first quarterly report of 2022 on April 28. In 2021, the company achieved an operating revenue of 5.656 billion yuan, a year-on-year increase of 43.20%, a net profit attributable to the parent company of 1.491 billion yuan, a year-on-year increase of 146.21%, and a net profit deducted from non attributable to the parent company of 1.381 billion yuan, a year-on-year increase of 169.26%. In 2022q1, the company achieved an operating revenue of 1.886 billion yuan, a year-on-year increase of 44.16%, a net profit attributable to the parent company of 607 million yuan, a year-on-year increase of 146.21%, and a net profit deducted from non attributable to the parent company of 591 million yuan, a year-on-year increase of 150.83%.
The performance continued to exceed expectations, and the business of new electronic components developed rapidly. On the revenue side, the company achieved an operating revenue of 5.656 billion yuan in 2021, with a year-on-year increase of 43.20%. In the first quarter of 2022, the company achieved an operating revenue of 1.886 billion yuan, with a year-on-year increase of 44.16%. The information construction of national defense equipment was promoted rapidly, and the company’s main new electronic components business continued to develop rapidly. On the profit side, the company realized a net profit attributable to the parent company of 1.491 billion yuan in 2021, with a year-on-year increase of 146.21%. In the first quarter of 2022, the company realized a net profit attributable to the parent company of 607 million yuan, with a year-on-year increase of 146.21%. Benefiting from the double improvement of revenue scale and profitability, the company’s performance is expected to continue to grow at a high level.
The profitability has been greatly improved and the ability of expense control has been improved. In terms of profitability, the gross profit margin of the company in 2021 was 60.82%, with a year-on-year increase of 7.25 PCT, and the net profit margin was 26.36%, with a year-on-year increase of 11.02 PCT; In 2022q1, the gross profit margin was 62.86%, with a year-on-year increase of 2.04pct, and the net profit margin was 32.18%, with a year-on-year increase of 5.82pct. The proportion of the company’s high value-added products continued to increase, the superimposed scale effect gradually appeared, and the profitability is expected to be further improved. In terms of expenses, the company’s expense rate during 2021 was 28.73%, a year-on-year decrease of 1.07 PCT, of which the sales expenses were 270 million yuan, a year-on-year increase of 11.87%, mainly due to the increase of performance awards and business expenses; The management expense was 941 million yuan, with a year-on-year increase of 67.28%, mainly due to the increase of one-time provision for out of plan expenses and repair expenses; The R & D cost was 370 million yuan, a year-on-year increase of 11.45%; The financial expenses were 44 million yuan, a year-on-year increase of 5.71%; During the first quarter of 2022, the expense rate was 21.05%, a year-on-year decrease of 7.08 PCT.
In 2021, the cash flow will change from negative to positive, and the operating condition is expected to improve significantly. In 2021, the company’s net cash flow from operating activities was 1.335 billion yuan, compared with – 69 million yuan in the same period last year. The cash flow changed from negative to positive, indicating that the company’s operating conditions have improved significantly. In 2021, the company’s notes payable and accounts payable were RMB 271 million and RMB 1069 million respectively, with a year-on-year increase of 61.06% and 40.11%; Contract liabilities amounted to RMB 214 million, with a year-on-year increase of 529.41%. The industry boom was high, and the company had sufficient orders on hand; Prepayments and inventories were 203 million yuan and 1.846 billion yuan respectively, with a year-on-year increase of 63.71% and 68.28%. The company increased procurement and actively prepared goods; The monetary capital was 1.648 billion yuan, with a year-on-year increase of 79.52%. The downstream demand continued to increase, and the company’s cash position was better.
Focus on core business, technological upgrading and promote product transformation. The company is the all-round leader of China’s military electronic components. In 2018, it took the initiative to peel off the low gross profit communication machine business, improve asset quality and operation efficiency, and actively expand the markets of automobile, electric power, photovoltaic and so on. On April 27, 2022, the company issued a fixed increase plan, which plans to raise 2.518 billion yuan to expand the production capacity of highly reliable electronic components and supplement working capital, including semiconductor power devices, hybrid integrated circuits, new resistance capacitance components, relays and control components, switches, display and control components and other products. Under the background of improving the quality and quantity of China’s new electronic components market, the company gives full play to its technical advantages, industry resources and scale effect, and its performance is expected to continue to grow at a high level in the future.
Investment suggestion: we estimate that the company’s revenue from 2022 to 2024 will be 7.458 billion yuan, 9.684 billion yuan and 11.968 billion yuan respectively. Due to the improvement of the company’s profitability, the net profit attributable to the parent company in 202223 will be increased to 2.244 billion yuan and 2.877 billion yuan (the previous value is 2.058 billion yuan and 2.677 billion yuan), and the net profit attributable to the parent company in 2024 will be increased by 3.631 billion yuan, corresponding to EPS of 4.33 yuan, 5.55 yuan and 7.01 yuan respectively, and corresponding PE of 22.19x, 17.31x and 13.71x respectively, The company’s performance has increased significantly and its profitability has been enhanced, maintaining the “buy” rating.
Risk warning: military orders are less than expected; Product delivery is not as expected; The construction of civil high-end products is less than expected; Performance forecast and valuation judgment are not up to date.
