Incident: On January 28, the company released its 2021 annual performance forecast. It is expected to lose 0.12-16 million yuan in 2021 and make a profit of 27 million yuan for the same period last year. The estimated revenue for 2021 is 57-590 million yuan, an increase of 86%-92% over the previous year. It is estimated that after deducting non-recurring profit and loss, a loss of 19 million yuan to 24 million yuan, and a profit of 17 million yuan for the same period last year. The impact of non-recurring profit and loss on profits was about 7.5 million yuan, mainly due to receipt of default compensation for plant relocation and government subsidies.
The risk of impairment was released, and lightweight packaging focused on liquid cold plates. According to the requirements of accounting standards, the company separately calculated impairment provisions for some long-term equity investments, confirmed losses from changes in fair value for some transactional financial assets, and confirmed investment losses in joint ventures. At the same time, the company comprehensively considered factors such as industry policy, market environment, future business development direction, etc., and planned inventory price reduction preparations for some products in accordance with prudential requirements. We believe that the company is in a period of business transformation. The downstream business application field has evolved from traditional industries such as communications, electricity, and home appliances to high-growth industries such as power batteries and energy storage batteries. Releasing the risk of impairment in traditional business will help the company get rid of its burdens and focus on liquid cold plate projects in a lightweight package.
Retec's liquid cold plate production capacity continues to expand, and order demand is strong. According to the company announcement, in order to further meet customer needs and improve delivery capacity, Retech plans to expand existing production capacity to expand production capacity and production capacity scale, and the company plans to increase capital for Retech. The total amount of this capital increase is expected to not exceed 100 million yuan. After this capital increase is completed, the company will hold no less than 67% of Retech's shares. According to the company announcement, in January 2022, Retech signed a land lease agreement for the construction of a new production line. The leased construction area is about 9401.65 square meters, and the expansion of production capacity continues to advance steadily.
Benefiting from strong demand for downstream orders, the company further increased capital to expand production capacity on the basis of adding two liquid cold plate production lines in 2021, and the liquid cold plate business can be expected to grow flexibly.
Investment advice: The company's traditional business calculation of impairment does not change the expansion momentum of the liquid cold plate business. Risk release is beneficial for the company to go lightweight to promote business transformation. We lowered the company's 2021 profit forecast and maintained the 2022-2023 profit forecast. The company's revenue for 2021-2023 is estimated to be 586 million, 1,237, 1,664 million yuan, and the net profit for 2021-2023 is expected to be 0.2, 111, and 138 million yuan. Give the company 45 times PE in 2022 and maintain the target price of 39.6 yuan. Maintain a “Buy-A” rating.
Risk warning: The purchase price of liquid cold plates fell short of expectations, downstream demand in the polymer materials business fell short of expectations, and the supply of raw materials was in short supply