\u3000\u3 Shengda Resources Co.Ltd(000603) 737 Skshu Paint Co.Ltd(603737) )
Event:
Skshu Paint Co.Ltd(603737) released the annual report of 2021: the company achieved an annual operating revenue of 11.429 billion yuan, a year-on-year increase of 39.37%; The net profit attributable to shareholders of listed companies was -417 million yuan, a year-on-year decrease of 183.08%.
The company also released the first quarterly report of 2022: the operating revenue of the company in 2022q1 was 1.698 billion yuan, a year-on-year increase of 14.49%; The net profit attributable to shareholders of listed companies was – 39 million yuan, a year-on-year decrease of 580.21%.
Key investment points:
The operating revenue increased against the trend, the price of raw materials rose, and the profit was under pressure. In 2021, the company achieved a contrarian growth in revenue, with an operating revenue of RMB 11.429 billion, a year-on-year increase of 39.37%, and continued to expand its market share. As the price of raw materials continued to rise and the provision for credit impairment losses had a great impact on the company’s net interest rate, the company’s net interest rate fell by 10 percentage points to – 3.47%. In 2021, the price of titanium dioxide soared, and the monthly average import unit price rose from 285782 dollars / ton in December 2020 to 335056 dollars / ton in December 2021. The price of lotion was also on the rise. In addition, due to the deterioration of the financial situation of downstream real estate enterprises, the company accrued an impairment loss of 840million yuan. Affected by this, the company realized a net profit attributable to the parent company of -417 million yuan in 2021, a year-on-year decrease of 183.08%. In the first quarter of 2022, the sales volume of the company’s main products increased, driving the operating revenue to increase by 14.49% year-on-year; The gross profit margin of the company in 2022q1 was 26.33%, which was basically the same year-on-year. However, due to the significant growth of corporate loans and the increase of financial expense rate, the net profit margin of the company decreased by 3.47 percentage points year-on-year to – 2.35%.
Expand production capacity and consolidate the leading position in the national market. In 2021, the company completed the efficiency tapping and technical transformation optimization of stable production plants such as Putian, Sichuan, Anhui, Henan, Tianjin, Guangdong and Hubei, vigorously promoted the lean improvement project, completed the capacity climbing of Hebei plant, and formed the supply network layout of five regional centers in the East, West, south, North and middle, so as to shorten the transportation distance and reduce the transportation cost; At the same time, a total of 100 associated plants have been arranged, and a number of self built powder plants have been completed and put into operation, so as to supplement and improve the flexible supply capacity in peak season and speed up the layout of green supply chain. As a Chinese leading enterprise with strong R & D strength and large production capacity, the company will further improve its market share and consolidate its market position in the process of increasing industry concentration.
Retail upgrading, channel empowerment, and continuous optimization of marketing network. In terms of interior wall coating business of home decoration, the company insists on thinking and innovation, refines the profit model of partners and upgrades the business mode, and cultivates channels. While vigorously developing new dealer customers, the company continues to explore the new model of high-end retail transformation, and continues to promote the construction of omni-channel marketing network. In 2021, the company unswervingly pursued the high-end retail strategy, adhered to differentiated development, and promoted the transformation of high-end retail by means of home store art coating experience store and home store experience store. 325 art paint experience stores, 268 home store experience stores, 112 community service stores and 21 home decoration channel experience stores were newly opened, completing the comprehensive development of “six in one” channels, and the three-dimensional channel layout was basically achieved. In terms of Engineering exterior wall coating business, the competitive advantage has been highlighted. The company continues to focus on the core values of “user-centered”, accelerate the renewal of the city, improve the product supply system solutions, and promote the hardbound beautiful life system. In terms of channel empowerment, the company has optimized the channel structure, strengthened cooperation with high-quality real estate, gradually launched small b-end application scenarios such as old transformation, urban renewal, public construction, schools, hospitals and factories, improved the layout of new channels, expanded channel diversification, and the construction of small b-end channels has been improved day by day. By the end of 2021, the number of small B channel customers of the company was about 14848, including 9850 new customers in 2021.
Profit forecast and investment rating. As a leading Chinese enterprise with strong R & D strength and large production capacity, the company achieved contrarian growth in operating revenue in 2021 and continued to expand its market share. We predict that the net profit attributable to the parent company from 2022 to 2024 will be 918 million yuan, 1.599 billion yuan and 2.387 billion yuan respectively, the corresponding EPS will be 244 million yuan, 4.25 million yuan and 6.34 yuan respectively, and the corresponding PE will be 30.46x, 17.48x and 11.71x. It will be rated as “overweight” for the first time.
Risk warning. The price of raw materials continues to rise; Overdue bills cannot be cashed in time; Downstream demand is lower than expected; The epidemic has repeatedly affected the economy; Adverse changes have taken place in the macro environment.
