Main points of investment
Full-year revenue hit a record high, and profitability was dragged down by rising raw material prices and freight costs. In 2021, the company recorded revenue of 13.919 billion yuan, an increase of 11.7 percent over the same period last year, a record high, mainly due to the overall recovery of the automobile industry and the contribution of new products such as battery boxes; the gross profit for the whole year was 4.084 billion yuan, an increase of 5.8 percent over the same period last year; and the net profit of returning to the mother was 1.497 billion yuan, an increase of 7.2 percent over the same period last year. The profit growth rate of the company for the whole year is not as fast as the income growth rate, mainly due to: 1) the rising cost of raw materials for traditional products drags down the gross profit margin; 2) the increase in freight costs leads to the increase in sales costs; and 3) the increase in the rate of management expenses caused by the reserve of battery boxes and overseas business personnel.
Overseas business is gradually recovering, and battery box revenue and gross profit are expected to grow significantly in 2022. From a regional point of view, thanks to the rapid recovery of customer business at home and abroad, the company's domestic income in 2021 was 8.2 billion yuan, an increase of 9.0% over the same period last year; overseas operating income was 5.72 billion yuan, an increase of 12.7% over the same period last year, accounting for a rebound in 0.4pct to 41.1% compared with 2020, mainly because overseas markets were more affected by health incidents in 2020. In terms of product lines, revenue from metals and strips, plastic parts, aluminum parts, battery boxes and other products increased by 6.4%, 13.0%, 6.3%, 181.6% and 37.6% respectively, of which the proportion of battery boxes increased to 1.9% compared with 2020.
Minshi has undertaken 45 global platform battery box projects, and nearly 20 battery box projects will be put into production in 2022, and revenue is expected to increase significantly compared with the same period in 2021. With the increase in the size of the battery box, the gross profit margin of the battery box is also expected to increase significantly.
The new orders exceeded expectations, with more than 150 billion yuan in-hand orders, and 2022 revenue is expected to achieve high growth. Minshi's new business reached a new high in 2021, with an annualized turnover of 10.6 billion yuan, of which 53% were overseas business, 46% were innovative products, 56% were new energy vehicles, and the completion of orders exceeded expectations in the middle of the year. The company's all-on-hand orders reached 150 billion yuan, of which battery boxes accounted for 29%, providing stable support for medium-and long-term performance growth. With the gradual release of orders, the company's operating income in 2022 is guided to achieve a growth rate of more than 30%.
Our point of view: Minshi Group is an auto parts company with global layout and management capabilities, has a stable and large customer base, and has successfully entered the international first-class mainframe factory supply system. The company's battery box business is advancing rapidly, and new product orders continue to grow, providing strong support for future performance growth. We estimate that the company's income from 2022 to 2024 will be 17.819 billion yuan, 22.314 billion yuan and 27.065 billion yuan respectively, and the net profit will be 1.661 billion yuan, 2.101 billion yuan and 2.597 billion yuan respectively. We give the company a target price of HK $26.59, which is equivalent to 15 times 2022 PE, maintaining a "buy" rating.
Risk tips: chip shortages persist, raw materials rise, and new product capacity increases less than expected.