\u3000\u3000 Zhejiang Dingli Machinery Co.Ltd(603338) (603338)
Core view: from 2018 to 2021, the company has continuously experienced trade friction, covid-19 epidemic, double reaction and other stress tests. Despite many difficulties, the company has actively responded, flexibly adjusted its strategy, and realized the layout of new arms and large-scale production, expansion in Chinese and foreign markets, new technology reserves and new production capacity step by step. In 2021, due to the price increase of raw materials + freight + product structure (the arm type is mainly China, with discounts for domestic large customers and low profit margin), the company’s revenue increased by 62% in the first three quarters, while the growth rate of net profit attributable to the parent company was only 18%, and the increase in revenue did not increase profits. Looking forward to 2022, the pressure of raw materials + freight will be gradually relieved. In addition, the localization rate of parts will be increased, the pressure on the cost side will be released, and the “double reverse” will be implemented. The overseas demand is expected to exceed expectations. We believe that the fundamentals of the company are expected to usher in a dilemma reversal.
There is strong demand in the aerial work platform market outside China. In 2022, the cost side pressure is expected to be released, and there is room to improve the profitability: from the overall performance of the industry, according to the decoration and aerial work machinery branch of China Construction Machinery Industry Association, the sales volume of China’s aerial work platform industry was 128000 in the first three quarters of 2021, a year-on-year increase of 58%, which has exceeded the annual level of 2020, Among them, 33000 units were exported, with a year-on-year increase of 157%. The industry demand has significantly warmed up, and the export market has performed well. Looking forward to 2022, benefiting from the infrastructure demand after the recovery of the epidemic in Europe and the United States, exports are expected to continue to exceed expectations. From the perspective of cost side pressure, it mainly comes from the rise of raw material and freight prices. Since the second half of 2021, the growth rate of steel comprehensive price index and China export container comprehensive freight index has slowed down one after another, which has not continued the trend of accelerated price rise. At the same time, the company is also actively saving costs by improving the localization rate of parts and components. We believe that the cost side pressure is expected to be relieved in 2022, and there is room for profit margin improvement.
We believe that the expected difference of the company mainly comes from the performance side, and the profit margin elasticity is expected to reflect:
(1) the proportion of China’s small and medium-sized customers is expected to increase, and the customer structure is optimized: in 2021, the company’s new arm type is mainly supplied to China’s major customers, and all major customers have price discounts and low profit margins. In 2022, under the background of “steady growth”, China’s market demand is good, and small and medium-sized lessors are not conducive to obtaining engineering project cooperation in the absence of arm type equipment, It is expected that the purchase proportion of small and medium-sized customers in China will increase in the future. We judge that the overall price discount of orders will be reduced and the gross profit margin will be improved.
(2) smooth expansion of overseas market and optimization of market and product structure: from the perspective of revenue structure, in the first half of 2021, the proportion of Dingli China’s and overseas revenue was 62% and 38% respectively, and the proportion of overseas revenue increased by 12 PCT compared with the end of 2020. With the company’s new arm entering the overseas promotion period in 2021, and the current recovery of market demand in Europe and the United States, the demand for electric products with higher value is more clear. We expect that the proportion of the company’s overseas revenue will further increase in the future; From the perspective of sub market gross profit margin, in 2020, the gross profit margin of the company in China and overseas markets will be 29.7% and 42.1% respectively. With the increase in the proportion of overseas revenue, we expect the overall gross profit margin of the company to improve.
(3) the scale effect of the new arm is obvious, and the product structure is optimized: the company’s new arm capacity will climb rapidly in 2021. According to the current monthly production capacity, we calculate that the annual output in 2021 is expected to exceed the expected 4000 units at the beginning of the year, more than doubling the output of 1836 arm type units in 2020. With the continuous optimization of production pace, the arm type production capacity is expected to be further improved in 2022, and the scale effect appears. At the same time, the shipment of new arm type products in overseas markets is expected to achieve a breakthrough in the future, Market structure optimization, under the catalysis of these two factors, the company’s profit margin is expected to improve.
Increase new production capacity and new products to further open up growth space: according to the announcement, the company raised 1.5 billion to invest in the project of 4000 large-scale intelligent high-altitude platforms per year. On the one hand, the capacity of the new arm Chinese market is climbing and the overseas market is gradually spreading out. With the continuous increase of demand, the company responds in advance to prevent capacity bottlenecks; On the other hand, the company’s technical reserves for high-level electric, insulating and other new products have become mature, maintaining the first mover advantage for new product layout and capacity. At present, the project funds have been raised for the construction of phase V plant, with a construction period of 36 months.
Investment suggestion: we estimate that the company’s revenue from 2021 to 2023 will be RMB 4.93 billion, RMB 6.96 billion and RMB 8.48 billion respectively, with growth rates of 66.6%, 41.3% and 21.8% respectively, and the net profit will be RMB 850 million, RMB 1.33 billion and RMB 1.72 billion respectively, with year-on-year growth rates of 28.3%, 55.8% and 29.7% respectively, and the corresponding PE will be 46, 29 and 23 times respectively; Maintain the “Buy-A” investment rating, and the six-month target price is 90.6 yuan, which is equivalent to the dynamic P / E ratio of 27 in 2023.
Risk tip: trade friction leads to a large decline in the export market; Intensified market competition leads to pressure on product gross profit margin; The construction progress of the fixed increase project is less than expected; Undertaking double anti-tariff led to a decline in profit margin.
