\u3000\u3 Bohai Water Industry Co.Ltd(000605) 099 Cocreation Grass Co Ltd(605099) )
Key investment points
The company's performance in 2021 is in line with market expectations, and 2022q1 is slightly lower than market expectations. In 2021, the company realized an operating revenue of RMB 2.302 billion, a year-on-year increase of + 24.39%, and a net profit attributable to the parent company of RMB 380 million, a year-on-year increase of - 7.45%, and a net profit attributable to the parent company of RMB 355 million, a year-on-year decrease of - 7.53%. In 2022q1, the operating revenue was 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 increase of - 13.80%; The net profit attributable to the parent company after deduction was 82 million yuan, a year-on-year increase of - 14.82%.
Leisure grass contributes to the main income increment, with strong overseas demand. In 2021, the company sold a total of 66.59 million square meters of artificial turf, with a year-on-year increase of + 29.78%. The average price of artificial turf products was 32.65 yuan / square meter, with a year-on-year decrease of - 5.23%. The decrease in the average price of products was mainly due to the increase in the proportion of leisure grass sales of the company. In terms of products, 1) the income of leisure grass was 1.647 billion yuan, a year-on-year increase of + 31.62%, and the export demand of leisure grass continued to improve, a year-on-year increase of + 31.78%; 2) The revenue of sports grass was 527 million yuan, with a year-on-year increase of + 2.08%, of which the compensatory demand for export rebounded, with a year-on-year increase of + 7.51%. The construction of domestic football field projects was delayed due to the impact of the epidemic, with a year-on-year increase of - 4.29%. 3) The revenue of grass silk and other products was 128 million yuan, a year-on-year increase of + 54.38%. The diversified business of the company grew rapidly. In terms of sub regions, the company's overseas sales revenue was 2.017 billion yuan, a year-on-year increase of + 30.54%, with strong demand growth in high gross profit regions such as Europe and the United States; The domestic revenue was 284 million yuan, with a year-on-year increase of - 6.73%, mainly due to the delay in the implementation of sports industry construction planning due to the repeated epidemic situation.
The rising cost of raw materials superimposes the fluctuation of RMB exchange rate, and the short-term profit is under pressure. In terms of profitability, the company's gross profit margin in 2021 was -9.02pp to 27.90% year-on-year, of which the gross profit margin of leisure grass was -9.14pp to 27.56% year-on-year, and the gross profit margin of sports grass was -9.62pp to 32.03% year-on-year; The net profit margin attributable to the parent company rose from -2.40pp to 16.52% year-on-year, mainly due to the sharp rise in the cost of raw materials and the appreciation of RMB caused by the rise of international crude oil and other bulk commodities. In 2022q1, the gross profit margin was 24.09%, year-on-year -7.25pp, and the net profit margin attributable to the parent company was 12.52%, year-on-year -6.04pp.
The release of production capacity exceeded our expectations and the company accelerated its expansion. In 2021, the capacity of Vietnam phase II project climbed rapidly, breaking the company's capacity bottleneck. By the end of 2021, the company's artificial lawn capacity had reached 110 million square meters, and the release rate of capacity was faster than we had expected. The company started to expand its production base in Vietnam in July 2021 to meet the growing market demand in the next three years. After the project is fully put into operation, the company's production capacity will reach 160 million square meters, with a stable leading position.
Profit forecast and investment rating: the artificial lawn industry has a broad space, and the penetration rate of leisure grass is increasing. The company has strong certainty of capacity release and is expected to accelerate the growth of future performance. Considering the impact of the rise in the price of short-term raw materials, we lowered the net profit attributable to the parent company from 2022 to 2023 to 440 / 710 million yuan (originally predicted to be 610 / 780 million yuan). It is estimated that the net profit attributable to the parent company in 2024 will be 900 million yuan, corresponding to 23 / 14 / 11x PE from 2022 to 2024, maintaining the "buy" rating.
Risk tips: exchange rate and raw material prices fluctuate sharply, downstream demand growth is less than expected, etc
