Incident: The company released its 2021 annual report and its 2022 quarterly report. Revenue in 2020 was 2,358 million yuan, +13.96% year on year; net profit of the mother was 111 million yuan, -47.74% year on year. 22Q1 achieved revenue of 478 million yuan, +1.33% year on year; Guimu's net profit was 7.37 million yuan, -83.18% year on year.
Revenue growth slowed in 21Q4 and 22Q1, and municipal PE pipelines developed rapidly. On a quarterly basis, the company's revenue growth rate in Q1-Q4 2021 was 50.55%/6.56%/22.39%/-4.60%, respectively, and the 22Q1 revenue growth rate was 1.33%, mainly due to the impact of the epidemic and the impact of industry demand sentiment on 21Q4 and 22Q1. By product, the revenue growth rate of PVC/PPR/PE pipelines in '21 was 10.52%/0.11%/36.54% respectively. In 2021, the company targeted new opportunities for municipal construction and focused on increasing investment in municipal pipeline business. The growth rate of municipal PE pipelines was significantly higher than the overall growth rate.
Gross margin is under pressure due to rising raw material prices. The gross margin of PVC/PPR/PE pipes in 2021 fell 8.45/1.46/5.99 percentage points year-on-year respectively, mainly due to large fluctuations in raw material prices.
The company's net sales interest rate in 2021 was 4.71%, with a year-on-year change of -5.56pct. In addition to the impact of fluctuations in raw material prices, 1) the company accrued asset impairment losses of 8.92 million yuan and credit impairment losses of 6.68 million yuan; 2) the corporate income tax rate in 2021 was 9.58%, compared to 17.59% in the same period in 2020.
Operating cash flow is under pressure in the short term, and the balance ratio remains low. The company's net cash flow from operating activities in 2021 was $0.05 billion, a change of $281 million over the same period last year. The balance of the company's accounts receivable and notes receivable at the end of the period was $277 million, an increase of 58.19% over the previous year. At the end of 2021, the company's balance ratio was 21.45%, a further decrease of 1.47 percentage points over the previous year. Net cash flow from operating activities in 22Q1 was -5531 million yuan, a year-on-year decrease of 596.48%, mainly due to a large increase in cash purchased goods and received labor payments in the current period.
Profit forecast and investment rating: As a leader in the plastic pipe industry in South China, the company is expected to continue to increase its market share, benefiting from the increased concentration of downstream real estate, the extension of the housing warranty period, and the promotion of multiple policies on the infrastructure side to drive demand for plastic pipes. The company focuses on promoting municipal pipeline business and continuously developing new municipal pipeline products. The proportion of PE pipelines continues to increase. It is expected that as the company's municipal business expands and new production capacity is put into operation one after another, and the subsequent implementation of the company's merger and acquisition of Kangtai Plastics, the production capacity scale effect will further increase. We expect the company's net profit to be 1.60/2.10/266 million for 2022-2024, respectively, and the corresponding PE will be 19X/14X/11X respectively. Considering the company's future production capacity increase and restructuring implementation expectations, it was covered for the first time and given a “increase in holdings” rating.
Risk warning: Downstream infrastructure and real estate industry fluctuation risk, raw material price fluctuation risk, industry competition risk, production capacity release of new construction projects falling short of expectations.
