\u3000\u3 Guocheng Mining Co.Ltd(000688) 006 Zhejiang Hangke Technology Incorporated Company(688006) )
Event: on the evening of April 29, 2022, the company released 2021 annual report and 2022 first quarterly report.
Key investment points
2022q1 performance meets expectations and waits for the performance to be repaired month on month: the company achieved a revenue of 2.48 billion yuan in 2021, a year-on-year increase of + 66%; The net profit attributable to the parent company was 235 million yuan, a year-on-year increase of - 37%. Among them, Q4's revenue in a single quarter was 720 million yuan, a year-on-year increase of + 56% and a month on month increase of + 5%; The net profit attributable to the parent company is - 3 million yuan, which is mainly caused by many factors (some overseas orders are delayed until 2022; the acceptance of logistics lines with low gross profit in Q4 accounts for a high proportion; the share based payment fee is increased after using BS model, etc.), all of which are phased effects. In 2022q1, the revenue reached 800 million yuan, a year-on-year increase of + 155% and a month on month increase of + 10%; The net profit attributable to the parent company was 94 million yuan, a year-on-year increase of + 80%, turning losses into profits month on month, and the performance improved significantly. It has stepped out of the stage affected by the low gross profit Chinese orders received after the epidemic in 2020.
In 2021, the profitability declined periodically, and in 2022, the profitability was repaired upward quarter by quarter: in 2021, the company's gross profit margin was 26.2%, year-on-year -22pct; The net interest rate was 9.5%, year-on-year -15pct. In 2021, the cost was well controlled, and the cost rate during the period was 17%, with a year-on-year rate of -3.2pct. Among them, the sales expense ratio was 1.9%, with a year-on-year increase of -2.5pct; The management expense ratio (including R & D) was 13.4%, with a year-on-year increase of -3.1pct; The financial expense ratio was 1.7%, with a year-on-year increase of + 2.4pct. In 2021, the profitability was low due to the influence of multiple factors (China accounted for a relatively high proportion of 2020 orders with revenue confirmed in 2021, rising prices of raw materials, lack of MCU chips, insufficient production capacity, outsourcing production, leading the cost of capacity expansion, order acceptance of low gross profit logistics lines after the epidemic, etc.). However, we believe that the decline in profitability is a phased impact and does not change the general trend that the company has benefited from overseas production expansion to improve its profitability since 2022. The gross profit margin in 2022q1 was 30.3%, with a year-on-year -9pct and a month on month 13pct; The net interest rate was 11.8%, with a year-on-year ratio of - 5pct and a month on month ratio of + 12pct. If the impact of about 48 million yuan of share based payment expenses is excluded, the corresponding net interest rate is 17.8%, which has gradually digested the impact of low gross profit orders after 20 years of epidemic. During 2022q1, the expense rate was 18.8%, year-on-year -9pct and month on month -0.3pct. In the process of profitability restoration, the darkest hour has passed. We expect that in 2022, the net profit margin is expected to rise to 20% (plus the impact of equity incentive fees), and the gross profit margin will reach 35-40%. We believe that after the adjustment of the company's production strategy in 2022, 75-80% of the raw materials will be processed by Hang Ke independently. By reducing the processing fee, the comprehensive gross profit margin of new orders in 2022 will be about 40%.
Fully benefiting from overseas production expansion, orders are expected to usher in a double rise in volume and price: by the end of 2022q1, the company's contract liabilities were 980 million yuan, a year-on-year increase of + 47%; The inventory was 1.47 billion yuan, a year-on-year increase of + 56%, mainly due to the company's full orders, which fully guaranteed the elasticity of short-term performance. The biggest highlight in 2022 is the overseas expansion of production, Zhejiang Hangke Technology Incorporated Company(688006) is one of the most beneficial equipment companies, and orders are expected to rise both in volume and price. We expect that the company's new orders in 2022 will be about 8-10 billion (60% - 100% year-on-year). Structurally, the proportion of Chinese customers and foreign customers will account for 60% and 40% respectively. (Note: the expansion of Chinese production capacity of overseas customers is also classified as overseas orders, such as LG's Nanjing factory).
Profit forecast and investment rating: considering that repeated outbreaks in the Yangtze River Delta may affect the overall acceptance rhythm of clients, we lowered the company's net profit attributable to the parent company from 2022 to 2024 to 6.7 (down 15%) / 15.1 (down 17%) / 2.1 billion yuan. The current stock price corresponds to 26 / 12 / 8 times of dynamic PE and maintains the "buy" rating.
Risk tip: the expansion of overseas battery plants is less than expected, and the competition pattern worsens.
