Key points of investment
The company released its 2021 annual report: achieved revenue of 940 million yuan, an increase of 31.88% over the previous year; achieved net profit of 163 million yuan, an increase of 17.71% over the previous year; net profit of Fumo was 157 million yuan after deduction, an increase of 43.81% over the previous year. Basic earnings per share were 0.55 yuan/share, up 14.61% year on year; weighted average return on net assets was 11.21%, down 0.73 pct year on year.
The company released its report for the first quarter of 2022: achieved revenue of 304 million yuan, an increase of 40.62% over the previous year; achieved net profit of 55 million yuan, an increase of 41.06% over the previous year; net profit of returned to the mother after deduction was 52 million yuan, an increase of 36.90% over the previous year. Basic earnings per share were 0.18 yuan/share, up 31.34% year on year.
Demand in the industry is booming. In 2021, high-performance transmission cables and components achieved revenue of 710 million yuan, an increase of 40.82% over the previous year; accounting for 75.57% of total revenue, an increase of 4.79 pct of revenue over the previous year; gross profit margin was 48.77%, a decrease of 2.50 pct over the previous year.
Optoelectronic systems and FC products achieved revenue of 218 million yuan, a year-on-year increase of 41.25%, accounting for 23.19% of total revenue, and a year-on-year increase of 1.54 pct in revenue; gross profit margin was 39.11%, a year-on-year decrease of 2.10 pct.
The cost rate improved during the period. In 2021, the company's overall gross margin was 46.46%, down 0.90pct from the previous year. The total expenses for the period were 237 million yuan, an increase of 25.29% over the previous year. Expenses for the period accounted for 25.26% of revenue, and the share of revenue decreased by 1.33 pct over the previous year.
Inventories increased year over year. In 2021, the company's receivables totaled 847 million yuan, an increase of 26.52% over the previous year, of which accounts receivable amounted to 422 million yuan, an increase of 30.21% over the previous year. The inventory was 559 million yuan, an increase of 64.23% over the previous year. At the end of the first quarter of 2022, the company's accounts receivable were 654 million yuan, up 55.10% from the beginning of 2022; inventory was 602 million yuan, up 7.67% from the beginning of 2022.
Shanghai Saizhi wholly owns Shanghai Saizhi and increases capital investment in the FC optical fiber sector. In March 2022, the company signed an “Equity Transfer Agreement” with Shanghai Saizhi's minority shareholders to acquire 39.07% of Shanghai Saizhi's minority shareholders' shares at a price of 46.1026 million yuan. After this acquisition was completed, Shanghai Saizhi became a wholly-owned subsidiary of the company, which is expected to further enhance annual performance.
In 2021, Shanghai Saizhi achieved revenue of 94.67 million yuan, an increase of 65.18% over the previous year; net profit of 244.9951 million yuan, a sharp increase of 176.91% over the previous year; and a net interest rate of 25.87%, an increase of 10.44 pct over the previous year.
The 2022 fund-raising capacity launch is expected to match strong demand. In August 2021, the company raised a total of 320 million yuan in non-public offerings for aerospace high-performance cable and rail transit data cable production projects (proposed to raise 112 million yuan, same below), integrated wire harness and optoelectronic system integrated product production projects (907.8865 million yuan), FC fiber bus series product production projects (25.6306 million yuan) and supplementary working capital (85.836 million yuan). By the end of 2021, the company had used a total of 85,514,300 yuan, with a cumulative usage progress of 26.90%.
We adjusted our profit forecast. We expect the company to achieve net profit of 2.51/3.42/442 million yuan in 2022-2024, EPS of 0.8/1.1/1.42 yuan/share, and corresponding PE of 17.9/13.1/10.1 times (2022.4.27), maintaining the “prudent increase in holdings” rating.
Risk warning: Competition in the aerospace sector intensifies; new product expansion falls short of expectations; raw material prices are rising.
