2021 performance is lower than we expected.
The company announced its 2021 results: revenue 1.382 billion yuan, an increase of 13.3% over the same period last year, and a net profit of 20 million yuan, which reversed losses over the same period last year. The performance was lower than we expected, mainly due to the decrease in investment in the rail transportation industry compared with the same period last year, and the company's current expense rate is still relatively high. In a single quarter, 4Q21's revenue was 507 million yuan, an increase of 41% over the same period last year, and its net profit was 49 million yuan, compared with a loss in the same period last year.
The business structure has changed and the comprehensive gross profit margin has improved compared with the same period last year. In 2021, the company's revenue from vehicle electrical equipment and ground electrical equipment was-2.7% year-on-year, which was 649 million yuan, respectively, and the gross profit margin decreased by 1.8/5.3ppt to 24.2% to 41.3% year-on-year. Smart Solutions business revenue increased 98% to 292 million yuan, gross profit margin increased by 13ppt to 49.9% year-on-year, and led the company's comprehensive gross profit margin to increase by 3ppt to 36.3% year-on-year in 2021.
The expense rate decreased compared with the same period last year, and Q4's profit margin improved month-on-quarter. In 2021, the company's sales, management, R & D, and financial expense rate decreased 1.7/1.1/0.7/0.3ppt compared with the same period last year, but the total expense rate during the period still reached 32.1%, which is at a high level. The total expense rate of 4Q21 during the period is 25.8%, and the net interest rate is revised to 9.8%. In 2021, the company had a net cash outflow of 13 million yuan from operating activities, compared with a net inflow of 47 million yuan in the same period last year.
Trend of development
Investment in the rail transit industry is relatively low, looking for structural growth opportunities. The investment of the National Railway Group has been negative for two consecutive years in 2020 and 2021, and there is still a certain gap between the company's income in 2021 and 2019. By the end of 2021, the company had orders of 1.823 billion yuan, compared with 1.946 billion yuan in the same period last year. In 2021, the company will strengthen cooperation with controlling shareholder Guangzhou Industrial Control, and there is a lot of room for cooperation in new product research and development, market development, cost control and other aspects. We believe that the current rail transportation industry has gradually entered a period of stock competition, customer resources and internal management have become the core elements of competition, and we expect that there is room for improvement in the company's sales expenses and financial expenses, which will drive the company to return to normal profitability.
Profit forecast and valuation
Considering that the planning of the National Railway Group is not as expected, we downgrade the 2022 EPS forecast by 23% to 0.14 yuan, and introduce the 2023 EPS forecast of 0.17 yuan. The company's current share price corresponds to 2022 51x/43xPE 2023. We maintain the target price of 7.33 yuan, corresponding to 2022 51x/43x PE 2023, which is basically the same as the current price. Maintain a neutral rating.
Risk
Downstream bidding is not as expected; new business development is not as expected.
