Source | Times Business School
Author | Lina Chen
Edit | Li Qiantao
Bofei Electric's recent stock price changes have attracted market attention.
On April 8, Bofei Electric (001255. SZ) fell to 28.35 yuan, down 10.0%. Since then, the stock price has continued to fall, from April 8 to April 10, in just 3 trading days, the stock price fell from 31.5 yuan to 25.99 yuan, an overall decline of 17.49%. On April 11, the stock price rose 3.04% to close at 26.78 yuan.
The share price fell, perhaps due to poor earnings forecasts. According to the previous performance forecast of Bofei Electric, the non-net profit deducted in 2023 will decline sharply, down 35.42% to 57.53% from the same period last year. It is worth noting that since the successful IPO of Bofei Electric in 2022, its performance has declined for 2 consecutive years.
However, before the listing of Bofei Electric, the overall performance showed a continuous growth trend. According to its prospectus, from 2019 to 2021, the three-year revenue increased by 51.7%, 67.2%, and 17.09% year-on-year respectively, and from 2019 to 2020, the two-year non-net profit increased by 85.75% and 119.24% year-on-year respectively, and only declined in 2021.
On April 9, Times Business School sent a letter to Bofei Electric to inquire about the decline in performance and the decline in gross profit margin, but the other party did not reply to the relevant questions.
After listing, the performance changed face, and the non-net profit fell or reached 50%.
According to public information, Bofei Electric's main business is the research and development, production and sales of polymer composite materials such as electrical insulation materials, which belongs to the insulation materials industry, and the downstream involves wind power generation, rail transit, industrial motors, household appliances, new energy vehicles and hydropower industries.
From 2019 to 2021, the operating income of Bofei Electric was 195 million yuan, 326 million yuan and 382 million yuan respectively, with a year-on-year change rate of 51.7%, 67.2% and 17.09% respectively, and in the same period, the net profit after deduction was 39 million yuan, 85 million yuan and 69 million yuan respectively, with a year-on-year change rate of 85.75%, 119.24% and -19.42% respectively.
With rising revenue, Bofei Electric successfully landed on the A-share main board on September 30, 2022.
Why did the performance continue to grow during the reporting period of the prospectus?Bofei Electric said in the prospectus that from 2019 to 2021, the market size of many downstream fields of insulating materials showed a growth trend, driving the expansion of the market scale of the insulating materials industry.
However, after the listing of Bofei Electric, the trend of continuous growth was reversed.
According to Bofei Electric's 2022 annual report, in 2022, Bofei Electric's revenue will be 354 million yuan, a year-on-year decrease of 7.34%, and the non-net profit will be 63 million yuan, a year-on-year decrease of 8.87%. That is to say, in the year of listing, Bofei Electric's revenue that had been rising for three years had a big change, and the non-net profit continued to decline last year.
Bofei Electric's 2023 performance forecast shows that its non-net profit will decline further. Among them, the net profit was 27.7211 million yuan to 41.5816 million yuan, down 60% to 40% year-on-year, and the non-net profit was 26.6226 million yuan to 40.4831 million yuan, down 35.42% to 57.53% year-on-year.
This means that Bofei Electric's non-net profit in 2023 will further decline compared with the non-net profit in 2022, which can be described as falling again and again.
Why did Bofei Electric's non-net profit fall again and again?
Times Business School found that Bofei Electric's net profit margin on sales is regressing. From 2020 to the first three quarters of 2023, the company's net sales profit margin was 28.24%, 21.35%, 20.27%, and 18.3%, respectively. It is not difficult to see that compared with 2020, the net profit margin in the first three quarters of 2023 has decreased by 10 percentage points. The profitability of Bofei Electric has long been different.
For the performance dive, the explanation given by Bofei Electric in the performance forecast is that the fluctuation of demand in the wind power industry in the main downstream market has led to a decrease in orders, and at the same time, the sales price has decreased, which has affected the company's main business income.
The gross profit margin varies greatly with the demand of the downstream industry
For the change in performance, Bofei Electric attributed it to changes in the industry and market environment. But interestingly, in the year when the market is good, the gross profit margin of Bofei Electric far exceeds the industry by more than 10 percentage points, while in the year when the market is bad, the gross profit margin of Bofei Electric is lower than the average of the same industry.
In 2019 and 2020 before listing, Bofei Electric's gross profit margin was as high as 48.55% and 50.14% respectively. In the same period, the average gross profit margin of its comparable companies was 42.65% and 38.72%, and the gross profit margin of Bofei Electric not only grew against the trend, but also far ahead of the average level of comparable companies.
However, the good times did not last long, in 2021, the average gross profit margin of comparable companies was 37.92%, and the gross profit margin of Bofei Electric was 37.02%, which has been surpassed.
And from 2021, Bofei Electric's gross profit margin has declined sharply, and it has continued to decline in the next two years. From 2022 to the first three quarters of 2023, its gross profit margin will be 36.42% and 35.24% respectively.
What's even more puzzling is that in a market environment that has a greater impact on performance, Bofei Electric's gross profit margin fluctuates by more than 10 percentage points, while the average gross profit margin of comparable companies listed by itself is stable at 37%-39%.
Although Bofei Electric has not announced the gross profit margin for the whole year of 2023, in the performance forecast, the company revealed that the product structure sold in 2023 has changed, and downstream customers have mostly changed to purchase low-end and low-gross margin products, which has increased the proportion of revenue of this part of the product, and the overall gross profit margin will continue to decline. At the same time, the price of major raw materials has risen significantly, which has increased the production cost of related products.
Looking at the industry trends and market changes in recent years, as Bofei Electric said, there have been great changes.
According to the prospectus, the downstream of Bofei Electric is mainly in the wind power industry. From 2019 to 2021, the sales revenue of the wind power industry accounted for 64.29%, 62.64% and 54.74% of its main business income, respectively, and the development of the downstream wind power industry had a great impact on it.
In the development of the wind power industry, 2020 and 2021 ushered in major opportunities, with the rush to install land breeze and sea breeze successively, which led to a surge in orders from the upstream industry. Bofei Electric's performance is also rising with the surge in downstream demand.
However, since 2023, the wind power industry has faced declining market bidding prices, subsidy declines, etc., and industry demand has decreased. According to the research report data of Guoyuan Securities, the average bidding price of wind turbine units has dropped from 1,939 yuan/kW in June 2022 to 1,681 yuan/kW in June 2023, and further decreased to 1,553 yuan/kW in September 2023.
In addition, the signs of reduced downstream demand can also be seen from the capacity utilization rate of Bofei Electric. Bofei Electric's capacity utilization rate also decreased from 100.37% in 2022 to 72.80% in the first half of 2023.
Bofei Electric said in the announcement that if the revenue of the downstream industry continues to decline or the price of main raw materials continues to rise, it cannot effectively continue to expand customers and increase market share, and Bofei Electric will continue to face the risk of declining performance.