1H21's income is + 19.6%, its net profit turns from loss to profit, and achieves relatively good growth in the face of fierce market competition and fluctuations in raw material prices. The production and sales of components rebounded, but the unit price decreased and the unit gross margin declined. Efficient management helped the expense rate to decline, operating cash flow became positive year-on-year, and new signatures increased year-on-year. Considering that the company has plenty of orders on hand and the new direction of C-end product layout, scale + management advantages are expected to support the company through the stage of fierce competition in the market, but it will still face rising prices of raw materials, downstream real estate regulation and fierce competition in the short term. We adjust our 2021-2023 net profit forecast to RMB 801,300 million (originally forecast is RMB 66max, 85.1b). The corresponding EPS forecast is 1.03 EPS 1.65 + 2.52 yuan (the original forecast is 1.36 + 1.74 + 2.27 yuan), and the current price is 10.6x/6.6x/4.3x. Based on historical and comparable valuations, we give the company 13 times PE in 2021 (2% discount to the company's historical average), correspond to the target price of HK $15, and maintain a "buy" rating.
The main income of 1H21 is + 19.6%, the return net profit changes from negative to positive, the competition pattern is fierce and the rising price of raw materials hinders the improvement of gross profit. In 1H21, the company's main business income totaled 1.36 billion yuan, + 19.6% year-on-year, gross profit 350 million yuan, + 10.2% year-on-year, and net profit of 47.16 million yuan, compared with a loss of 21.8 million yuan in the same period last year. The lower growth rate of gross profit than the growth rate of income is mainly due to higher costs caused by higher prices of raw materials. 1H21's own performance rebounded compared with the same period last year; the profitability of the associated company improved and reduced its loss to 8.613 million yuan (- 63.6% compared with the same period last year), and the income from the loss of significant impact on the associated company caused by accounting changes was 30.62 million yuan (+ 74.0% compared with the same period last year), helping to turn the net profit from negative to positive. From a business point of view, the revenue of PC component manufacturing / equipment is 1.14 billion yuan, compared with the same period last year, which is + 12.4% and 306.6% respectively, and the gross profit is 270 million yuan, which is 422.3% of the same period last year. The substantial increase in equipment revenue is mainly due to the acceptance of equipment in the joint factories affected by the epidemic last year.
Sales volume rose steadily and cost control was better, but a slight decline in sales unit price led to a decline in gross margin per unit of components. In terms of production and sales volume, the production and sales volume of 1H21 components is 437 million cubic meters, which is + 32.8% and 25.5% respectively compared with the same period last year. From the price point of view, the average annual unit price of 1H21 components is 2492 yuan per square meter (year-on-year-292 yuan per square meter,-10.5%). The intensification of market competition has led to a slight decline in unit price. In terms of cost, the unit cost of 1H21 is 1899 yuan per square meter (year-on-year-73 yuan per square meter, year-on-year-3.7%). Cost efficiency and scale effect enable the company to overcome the rise in raw material prices, and the cost continues to decline; reflected in gross profit, 1H21 unit gross profit is 593 yuan per square meter (year-on-year-219 yuan per square meter,-27.0%).
We believe that in the medium term, with the improvement of the market competition pattern and the company's operating capacity, profits will gradually pick up.
The gross profit margin decreased slightly, the expense management was good, and the increasing efforts to clear the arrears brought about the positive turn of operating cash flow compared with the same period last year.
1H21's comprehensive gross profit margin is 26.1%, year-on-year-2.2pcts. Among them, the gross profit margin of manufacturing / equipment is 23.8% and 37.9% respectively, and-5.3% and 8.4% respectively compared with the same period last year. We believe that the gross profit margin will pick up with the improvement of the company's scale effect and the consolidation of its market position. The rate of expenses during the period is 25.5%, compared with the same period last year-2.9pcts. Among them, the sales / management / R & D / financial expense rate is 4.8%, 11.4%, 4.2%, 5.1%, and + 0.3/-2.8/-0.9/+0.5pct. During the period, the company strictly strengthened the control of expenses, and the promotion of C-end products led to an increase in the rate of sales expenses. In terms of cash flow, 1H21 has a net operating cash inflow of 330 million yuan (an outflow of 19.71 million yuan in the same period last year). The company has set up a legal debt settlement team to strengthen payback management and improve operating cash flow; the net investment cash outflow is 310 million yuan (360 million yuan in the same period last year), mainly due to the basic improvement of the layout of the joint factory and the reduction of investment expenditure. The net outflow of fund-raising cash was 220 million yuan (118 million yuan in the same period last year).
Newly signed orders are higher than the same period last year, storing momentum for the subsequent performance rebound. The newly signed order for PC component manufacturing in 1H21 is 2.37 billion yuan, compared with the same period last year, and the newly signed CAGR reached 54% from 2016 to 2020, which continues to lead the industry growth at a high growth rate. We expect the company to maintain a rapid growth rate of 40% 50% in 2021. By the end of 1H21, the company's PC component outstanding orders were 6.3 billion yuan (year-on-year + 21.3%), and the component outstanding order / component income was 2.3x (an increase of 0.2x compared with the end of 2020). The overall order reserve is abundant, but considering that it takes a certain period for order fulfillment and the expectation that the regulation of the downstream real estate side will continue in the short term, we believe that the effect of reserve orders will be more reflected after 2022.
Continue to expand the scale + lean management moat, B2C may bring new growth points in the future. 1) the joint venture factory has gradually entered a period of production and profit. As of 1H21, the company has accumulated investment / production capacity / profitability of the joint plant in 62-60-15, compared with the same period last year. The joint plant capacity will reach 5 million cubic meters in the near future. 2) the company introduces consulting companies to improve production processes, implement lean management system, strictly control project risks, increase efforts to urge funds, and improve profitability. 3) at the end of March, the Ministry of Housing and Construction issued a notice on strengthening green and low-carbon construction in county towns, requiring that in the future new houses in county towns should mainly be built with 6 floors or less, and that the proportion of new houses in county towns should not be less than 75%. Yuanda residence products greatly shorten the construction cycle through a highly standardized "full assembly" model, and have time limit advantages and cost advantages in low-rise buildings. Combined with B-Box folk products for beautiful villages, the company has a certain first-mover advantage in 2C, and we are waiting for a new growth point in the C end in the future.
Risk factors: intensified competition in the industry leads to a significant decline in the unit price of components; the landing and operation of the joint plant is not as expected; the operation effect of the PC-CPS system is not as expected; the promotion of C-end products is not as expected.
Investment suggestion: considering the abundant on-hand orders, the scale + benefit advantage is expected to support the company through the stage of fierce market competition and the new direction of C-end product layout, but it will still face the increase of raw material prices, downstream real estate regulation and fierce competition in the short term. We adjust our 2021-2023 net profit forecast to RMB 50,000,000 (originally forecast is RMB 665pm). The corresponding EPS forecast is 1.03 EPS 1.65 + 2.52 yuan (the original forecast is 1.36 + 1.74 + 2.27 yuan), and the current price is 10.6x/6.6x/4.3x. Based on historical and comparable valuations, we give the company 13 times PE in 2021 (2% discount to the company's historical average), correspond to the target price of HK $15, and maintain a "buy" rating.