\u3000\u3 China Vanke Co.Ltd(000002) 918 Monalisa Group Co.Ltd(002918) )
Key investment points
Event: the company released the first quarterly report of 2022. During the reporting period, the operating income was 1.06 billion yuan, a year-on-year increase of + 6.7%; The net profit attributable to the parent company was -73.817 million yuan, up from 47.08 million yuan in the same period last year; Deduction of net profit not attributable to parent company -76.289 million yuan, compared with 34.591 million yuan in the same period of last year; The net cash flow from operating activities was – 140 million yuan, compared with – 230 million yuan in the same period of last year.
The role of channel layout continues to appear, and the distribution business drives the growth of revenue. During the reporting period, under the downward pressure of the real estate boom (the completed area of houses in 22q1 was 170 million square meters, with a year-on-year increase of – 11.5%), the company’s strategic engineering business realized an income of 500 million yuan, with a year-on-year increase of – 0.2%. However, benefiting from the continuous sinking layout of channels, the company’s distribution business realized an income of 560 million yuan, with a year-on-year increase of + 13.8%, which is the driving force of Q1 income growth. In terms of channel share, the company’s distribution business accounted for 53.0% in the reporting period, with a year-on-year increase of + 3.3pct, compared with + 1.9pct at the end of 2021. We believe that under the influence of the epidemic in March, the distribution business still achieved double-digit growth, reflecting the significant effect of the company’s strengthening the layout of the blank market. It is expected that the follow-up strategic engineering business will remain stable, and the distribution business is expected to continue to drive revenue growth.
The rise of raw fuel prices intensifies the cost pressure and waits for the performance repair after the pressure period of the industry. The gross profit margin of 22q1 company was 19.1%, with a year-on-year ratio of -10.8pct and a month-on-month ratio of -3.6pct. Affected by the continued high prices of natural gas, coal and raw materials (the price of natural gas at the end of March was + 115.1% year-on-year and + 66.9% compared with the end of 21), the company’s short-term performance is still under pressure; In addition, Q1 involves holiday and epidemic factors. Under the pressure of sales growth, the cost sharing is large, which also has an impact on the gross profit margin. During the reporting period, the company’s expense rate was 25.0%, with a year-on-year increase of + 1.6pct. In terms of splitting, the expense rates of sales, management, R & D and finance were -0.4pct, + 0.4pct, + 1.0pct and + 0.6pct respectively year-on-year. The significant increase in financial expenses was due to the increase of loan interest and the provision of convertible bond interest. 22q1’s net interest rate is – 7.7%. In the short term, due to the superposition of many factors such as the downturn of the real estate boom, the rise of raw fuel prices and repeated epidemics, the company’s performance may have gradually hit the bottom, the industry pressure period is accelerating the liquidation of small and medium-sized enterprises, and the competition pattern is expected to be optimized in the future. As a leader in the industry, the company has various advantages such as channels, funds and brands, and hopes to be the first to usher in performance restoration.
The cash received ratio increased year-on-year, and the cash flow situation improved. 22q1’s net cash flow from operating activities was – 140 million yuan, compared with – 230 million yuan in the same period of last year, with a cash to cash ratio of 121.8%, a year-on-year increase of + 10.9pct. During the reporting period, the return of accounts receivable and the receipt of contract margin increased, which promoted the significant improvement of cash flow. We believe that the company will further strengthen risk control and improve the payment collection ability in the face of potential credit risk problems of real estate enterprises. With the gradual increase of the proportion of distribution business, the cash flow is expected to continue to improve in the future.
Core logic: we believe that compared with other leading enterprises in the ceramic tile industry, the company has outstanding advantages in product strength. The company adopts the two wheel drive mode of “distribution channel + real estate strategy”, realizes the balanced development of B and C, the steady expansion of production capacity, the continuous improvement of brand popularity and the rapid growth of performance for many consecutive years.
1) product strength: through scientific and technological innovation, aiming at the world’s first-class production technology of building ceramics products, the company continues to strengthen the R & D and promotion of large-scale ceramic sectors, rock sectors, multi-functional rock sectors and ceramic thin sectors. The production and sales scale of ceramic sectors and rock sectors ranks in the forefront of the industry, and is expected to further become a hot-selling advantageous product in the market.
2) channel: TOC business: the implementation of the “channel sinking” strategy of distribution channel has been effective, and there is still room for sinking. In the next step, the company will continue to increase the layout of county-level and town level markets. It is expected that the retail end will benefit from the marginal slowdown of fine decoration trend and the accelerated expansion of small B channel. Tob business: the company implements the “real estate strategy” marketing strategy and has in-depth cooperation with leading real estate developers poly, Vanke, country garden and other high-quality large customers. In addition, the company continues to expand its real estate customers. It is expected that the engineering field will benefit from the continuous expansion of customers and the further improvement of the concentration of downstream real estate developers for a long time.
3) brand: Monalisa Group Co.Ltd(002918) is a first-line brand in the industry, with rich brand culture and connotation. In the field of tooling, the company has won the honor of China Vanke Co.Ltd(000002) level supplier for many consecutive years, and has also become the exclusive supplier of official building ceramics for the 22nd Hangzhou Asian Games. In the retail field, the company realizes the promotion of brand value through the overall image of high standard and standardized terminal stores.
4) capacity advantage: in 2021, the company’s three intelligent production lines in Guangxi Tengxian production base, three special high-performance ceramic sector production lines in Guangdong Xiqiao production base and nine production lines in Jiangxi Gao’an production base were successively put into operation. The release of capacity supported the growth of sales.
Profit forecast: the company is a leading enterprise in high-end ceramics with significant brand advantages. Capacity expansion, product upgrading and “channel + engineering” two wheel drive help the company develop rapidly. We believe that the periodic pressure of the industry does not change the medium and long-term development prospects of the company, and the investment value is prominent. Considering the impact of the recent sharp rise in energy and raw materials on the performance, we adjusted the profit forecast. It is estimated that the net profit attributable to the parent company in 22 and 23 years will be 500 million and 830 million yuan (the previous forecast is 700 million and 880 million yuan), and the corresponding PE will be 11 and 7 times, maintaining the “overweight” rating.
Risk tip: the intensification of industry competition leads to a sharp decline in the average profit margin of the industry; Business risks caused by the depression of the downstream real estate market; The progress of the company’s new production capacity is not up to expectations; Major real estate customers have business risks and other industry competition.
