Incident: The company released its 2021 annual report. During the reporting period, the company achieved revenue of 3,883 million yuan, an increase of 20.98%; realized net profit of 235 million yuan to the mother, a decrease of 23.44% over the previous year; and basic earnings per share of 0.62 yuan/share. Among them, the company achieved quarterly revenue of 1,054 million yuan in the fourth quarter, an increase of 6.71% over the previous year; it achieved net profit of 909 million yuan, a year-on-year decrease of 88.63%.
Energy and raw material costs are rising, and the company's gross margin is under pressure. During the reporting period, the company's comprehensive gross margin was 27.66%, a year-on-year decrease of 3.67%. Among them, the quarterly gross margin for the fourth quarter of 2021 was 24.69%, down 1.91% year on year and 4.99% month on month. The company's gross margin declined mainly because: in 2021, the company's fuel power costs, manufacturing costs and raw material costs increased significantly, rising 39.12%, 36.07%, and 28.19%, respectively, year-on-year.
Expense rates increased slightly, and net interest rates declined sharply year over year. The company's expenses rate for the period was 20.48%, an increase of 0.25% over the previous year. Among them, the sales expense ratio was 8.29%, up 0.06% year on year; management expense ratio was 7.38%, up 0.59% year on year; financial expense ratio was 0.52%, down 0.51% year on year; and R&D expense ratio was 4.29%, up 0.1% year on year. In terms of net interest rate, the company's net interest rate during the reporting period was 6.11%, a year-on-year decrease of 3.75%. Among them, the company's net interest rate for the 21Q4 single quarter was 0.04%, down 8.42% year on year and 10.42% month on month.
Multiple categories are growing steadily, and domestic and foreign sales are developing collaboratively. During the reporting period, the company's sanitary ceramic/hardware and sanitary ware/wall tiles/bathroom cabinets/bathtub/shower room/other businesses achieved revenue of 19.35/ 6.56/ 5.95/2.76/ 1.42/234 million yuan respectively, up 15.57%/22.05%/40.5%/23.04%/36.67%/5.69%, respectively. Among them, domestic sales achieved revenue of 2,868 billion yuan, an increase of 18.93% over the previous year, accounting for 74.73%; export sales focused strategies and bucked the trend. By the end of 2021, the company had obtained product certifications from 17 countries and regions including the United States, Canada and Europe, and 5 factory certifications, achieving revenue of 970 million yuan, an increase of 25.43% over the previous year, accounting for 25.27%.
Retail and integrated channels are two-wheel drive, and multiple channels empower domestic sales. In terms of retail channels, the company achieved revenue of 2,002 billion yuan by speeding up the construction of specialty stores and optimizing the dealer system, integrating online and offline marketing, increasing its market share, and achieving revenue of 2,002 billion yuan, an increase of 25.77% over the previous year, accounting for 52.14%. In 2021, the company opened 350 new specialty stores and upgraded 240 stores, with a total area of 2,077 domestic specialty stores, with a total area of 399,800 square meters, including 1,779 bathroom stores and 298 tile stores. In terms of finishing channels, in 2021, the company reached cooperation with leading decoration companies such as Dianshi Home Furnishing, Master Finishing, Jinhuang Decoration, Yezhifeng Decoration, Fang Lin Decoration, and Jinzao Decoration, and is expected to continue to grow in the future.
Investment suggestions: The company has excellent R&D capabilities, achieves high product strength, and continues to expand channel layout, optimize retail channels, increase integrated channels, and have strong core competitiveness. It is expected that the company will achieve EPS 1.05 /1.26 /1.48 yuan/share in 2022/23/24. The corresponding PE is 9X/7X/6X, maintaining the “recommended” rating.
Risk warning: risk of economic growth falling short of expectations; risk of increased market competition.