The company's 2021 performance is lower than we expected.
The company announced its 2021 results: the income was 85.62 billion yuan, up 60.0%, and the net profit was 1.3 billion yuan, down 47.5%. Among them, the 2H21 income was 49.2 billion yuan, the same increase / increase of 58.9% / 35.1%, the net profit of 640 million yuan, and the decline / decline of 61% / 3.3%. Due to the impact of the increase in the price of upstream accessories, the company's performance in 2021 was lower than we expected.
Trend of development
The traditional lead-acid business has increased steadily, and the performance of the recycling business is outstanding. In 2021, the company's manufacturing revenue reached 37.92 billion yuan, an increase of 18.8 percent, while revenue from trade and other businesses totaled 47.7 billion yuan, an increase of 60.0 percent. From the perspective of manufacturing business, 1) the revenue of lead-acid battery business increased by 12.3% to 31.82 billion yuan. Among them, we expect to ship 344 million lead-acid batteries for electric two-wheelers / tricycles for the whole year, with an increase of 10.8%, maintaining a market share of 45-50%, benefiting terminal prices and increasing revenue by 14.1% to 29.15 billion yuan; starting and stopping batteries benefit from a new order release revenue of 185.6% to 510 million yuan; and special electric vehicle battery revenue increased by 12.3% to 590 million yuan. 2) the revenue of lithium battery business decreased slightly by 6.8% to 987 million yuan, mainly due to the slowdown in demand for shared bicycles and the increase in lithium battery costs, and the company reduced orders; 3) the recycling business benefited from the overall release of production capacity and the increase in the proportion of external supply, and revenue increased by 121.8% to 2.68 billion yuan compared with the same period last year. At the end of 2021, the company formed a lead-acid and lithium recovery capacity of 700,000 tons / year and 7000 tons / year, and plans to further increase to 1 million tons / year and 100,000 tons / year in the future. we expect the drive cycle business to maintain a high growth rate.
The rise in raw material prices has led to a decline in gross profit margin, the company is actively transmitting cost pressure, and gross profit margin is expected to pick up in 2022. Affected by the rise in raw material prices, the company's manufacturing comprehensive gross profit margin fell 5ppt to 12.1% year-on-year. In terms of business: 1) lead-acid battery prices of raw materials such as sulfuric acid, plastic shell rose sharply, we expect the company's 21-year gross profit margin to decline to 13.3% compared with the same period last year. 2) Lithium business is also affected by rising prices of upstream lithium, cobalt and other metals. The company's 4Q21 is gradually transmitting the cost pressure of lead-acid accessories downstream, while lithium electricity will further focus on high-end customers, and we expect the company's comprehensive gross profit margin to stabilize and pick up in 2022.
Plus lithium power production capacity, power storage business. The company will produce about 3GWh at the end of the 21st year, and plans to increase 10GWh production capacity in the next 2-3 years, focusing on energy storage business. At present, the company has successfully developed air-cooled energy storage standard boxes and liquid-cooled energy storage standard boxes for bulk supply of 180Ah and 280Ah, and actively expand customers at home and abroad. We believe that due to the high global energy storage demand, energy storage business is expected to become a new growth pole of the company.
Strengthen cost control, reduce cost and increase efficiency significantly. In 2021, the company's sales, management and financial expense rates were 1.21%, 1.16% and 0.30% respectively, down 0.54ppt, 0.32ppt and 0.10ppt compared with the same period last year.
Profit forecast and valuation
Taking into account the slowdown in demand growth for downstream two-wheelers and the rise in raw material prices, we lowered our 2022 profit forecast by 34% to 1.886 billion yuan, and introduced a 2023 profit forecast of 2.107 billion yuan; corresponding to our target price, we lowered our target price by 47% to HK $9.0; the current stock price and target price correspond to 22max 23 3.5x/3.1x Phand E and 4.4x/3.9x Phand E, with 32.9% upside room to maintain an industry rating that outperforms.
Risk
Domestic sales of electric tricycles fell short of expectations, and the price of upstream raw materials rose higher than expected.