2021-11-01Zhou Ershuang and Zhu Beibei of Soochow Securities Co., Ltd. conducted a study on Guomao shares and released a research report "2021 Third Quarter Report Review: Q3 Profitability Rebounded Significantly, Slightly Exceeding Market Expectations", this report gave Guomao shares an overweight rating, and the current stock price was 41.67 yuan.
Guomao Shares (603915)
Event: On October 29, the company released the third quarterly report, the operating income in the first three quarters was 2.258 billion yuan, an increase of 43.95% year-on-year; the net profit attributable to the mother was 345 million yuan, an increase of 45.67% year-on-year; and the net profit after deduction of non-attributable to the mother was 323 million yuan, an increase of 53.12% year-on-year.
Investment essentials
Capacity expansion + new business expansion smoothly, the company's performance maintained high growth
The company's 2021Q1-Q3 operating income and attributable net profit maintained rapid growth. We judge that the main reasons are: 1) the general reducer industry is booming, the supply has continued to exceed demand since the beginning of the year, the company has benefited significantly as a domestic leader, and the performance under the release of production capacity has been cashed; 2) the new business expansion has been smooth, and the company has made breakthroughs in the field of special reducers for construction machinery and high-end Jienuo reducers. Among them, in the single quarter of 2021Q3, the company's operating income was 777 million yuan, +34.72% year-on-year, -7.41% quarter-on-quarter; net profit attributable to the mother was 137 million yuan, +60.59% year-on-year, +6.27% month-on-month.
The effect of product price increases is reflected in the fact that the profitability of Q3 single-quarter has rebounded significantly
The consolidated gross margin for 2021Q1-Q3 was 27.15%, a year-on-year increase of -1.72pct. Among them, the gross profit margin in the single quarter of 2021Q3 was 29.16%, +3.29pct month-on-quarter, and the profitability of the single quarter rebounded significantly. We judge that the main reason is that the company, as the leader in the industry, has successfully transmitted the upward pressure of raw material prices to the downstream through product price increases by virtue of its high bargaining power. And with the gradual decline in raw material prices, the company's gross profit margin still has room to rise.
The 2021Q1-Q3 net margin was 15.30%, +0.17pct year-on-year. Among them, the net profit margin in the single quarter of 2021Q3 was 17.62%, +2.85% year-on-year, and +2.24pct sequentially. The expense ratio of the company during the 2021Q1-Q3 period was 10.28%, -1.09pct year-on-year, and the cost control capacity was continuously optimized. Among them, the sales expense ratio was 3.05%, year-on-year -2.37pct, mainly due to transportation expenses included in operating costs; the financial expense ratio was -0.21%, year-on-year +0.06pct; the management expense ratio (including research and development) was 7.44%, +1.22pct year-on-year, mainly due to the increase in share payment and listing expense sharing. In addition, the company continued to increase R & D investment, 2021Q1-Q3 investment in R & D expenses of 81.81 million yuan, +43.9% year-on-year.
Orders in hand are full, and operating net cash flow is affected by stockpiling
Benefiting from the steady growth of the general reducer business and the smooth expansion of new business, the company has a full order in hand. At the end of Q3, the company's contract liabilities were 0.67 billion yuan, +4.89% year-on-year, and the inventory amount was 725 million yuan, +87.3% year-on-year.
In 2021Q3, the company's operating cash net flow was 0.43 billion yuan, -23.00% year-on-year, and we judge that it is mainly due to the company's advance stockpiling to prevent the continuous rise in raw material prices. Subsequently, with the gradual increase in sales collections, the company's cash flow is expected to continue to improve.
Endogenous + epitaxial, dual logic drive under the reducer faucet position is stable
The company is based on the reducer industry, endogenous + epitaxial dual growth logic is stable. 1) Endogenous: the company's R & D investment continues to increase, the technical level continues to improve, to further build the core competitiveness; the fundraising project is expected to solve the problem of capacity constraints on development, the current production capacity is growing steadily. 2) Extension: expand the special reducer business in the field of construction machinery, the 2021H1 tower special reducer breaks through key new customers, the development of new products in the field of construction machinery is smooth, and it is expected to bring new breakthroughs in performance; the acquisition of "Lexno" to open up the high-end market with the "Jienuo" brand, as of the reporting period, the business of Jienuo is progressing smoothly, the product supply is in short supply, and the added value of the company's products is further improved.
We believe that as a domestic reducer leader, the company has long benefited from the upgrading of manufacturing + the acceleration of localization substitution, with the release of production capacity brought about by the landing of the fundraising project, coupled with the smooth development of the construction machinery reducer business and the Jienuo business, the company's performance is expected to be further improved.
Profit forecast and investment rating: With the gradual release of the company's production capacity and the full release of performance elasticity in hand, we maintain the company's net profit forecast of 4.8/6.4/78 million yuan for 2021-2023, and the current market value corresponds to PE of 37/28/23 times, maintaining the "overweight" rating.
Risk warning: macroeconomic downturn risk, dealer management risk, raw material price fluctuation risk.
In the past 90 days, a total of 9 institutions have given ratings, 6 buy ratings and 3 overweight ratings; the average target price of institutions in the past 90 days has been 53.34; the Securities Star Valuation Analysis Tool shows that Guomao Shares (603915) good company rating is 3.5 stars, good price rating is 2.5 stars, and valuation comprehensive rating is 3 stars.