Event: according to the company's annual report of 2021 and quarterly report of 2022, the company achieved 2.063 billion yuan in operating income in 2021, an increase of 43.72% over the same period last year, deducting 472 million yuan in non-return net profit, an increase of 44.66% in the first quarter of 2022, achieving operating income of 455 million yuan, an increase of 5.47% over the same period last year, deducting non-homed net profit of 111 million yuan, an increase of 29.23% over the same period last year.
Steady growth in revenue, plateau material prices bring cost-side pressure: according to the company's annual report, benefiting from the trend of pump manufacturing shifting to Asia in 2021, the company's core products plastic bathroom pumps and stainless steel pumps increased by 79.67% and 15.62% respectively compared with the same period last year, and overseas sales increased by 67.6%.
However, due to the sharp rise in the price of raw materials, the direct material cost increased by 51.42% compared with the same period last year. Although the company raised the price of its products, it could not fully offset the increase in cost. The gross profit margin of plastic bathroom pump decreased by 3.98%, stainless steel pump gross profit margin decreased by 2.45%, and general pump gross profit margin decreased by 0.05%, resulting in a 1.94% decline in the company's overall gross profit margin. Relying on the substantial growth on the demand side, the company still maintains rapid growth in the context of the decline in gross profit margin. In the first quarter of 2022, due to the high revenue base in the same period last year and the relatively sluggish domestic market, the company's revenue side achieved a small growth of 5.47%, but thanks to product price increases and raw material price control, the company's gross profit margin rebounded to 33.81% in the first quarter, and the profit side still has a strong growth performance. At present, domestic raw material prices remain high, and important raw materials such as enamelled wire, aluminum ingots and stainless steel plates will still exert some pressure on the company's operations in the first half of the year, but we expect that if there is a significant decline in raw material prices in the second half of the year, the company is expected to achieve better profit growth under the premise of low income growth.
Excellent financial statements, continue to maintain high dividends: the company's financial indicators still maintain excellent performance. As of the first quarter of 2022, the company's asset-liability ratio was only 7.46%, interest-free liabilities, net assets of 2.26 billion yuan, including monetary funds and transactional financial assets of 1.377 billion yuan. For the whole year of 2021 and the first quarter of 2021, the net operating cash flow of the company was 274 million yuan and 74.72 million yuan respectively. Since listing, the company has maintained a high dividend. From 2018 to 2020, the cash dividend was 1.81,2.52 and 330 million yuan, and the dividend ratio was as high as 80.94%, 92.68% and 92.10%. In 2021, the company plans to pay a cash dividend of 357 million yuan, with a dividend ratio of 73.86%.
Pump manufacturing transfer and infrastructure development to ensure the company's long-term growth potential: in recent years, the pump manufacturing base has been continuously transferred to China and other Asian countries. At present, China has formed a production system with considerable production scale and technical level. As an important production base of global pump products, the company, as a leader of plastic sanitary pumps, is expected to fully enjoy the growth of overseas orders. With the large-scale migration of rural residents to cities and cities and the continuous development of rural modernization, large-scale investment and construction in civil fields such as water conservancy facilities and agricultural irrigation will bring large-scale demand for centrifugal pumps. The company's stainless steel pump series products have stood in the first echelon position in the same industry in China. According to the annual report, the company plans to have an annual production capacity of 8 million sets of civil centrifugal pumps in the next five years, a big increase from the output of 4.6315 million units in 2021, ensuring the company's long-term growth potential.
Investment advice: we estimate that the company's income from 2022 to 2024 will be 22.43,27.07 and 3.273 billion yuan respectively, and its net profit will be 5.9,7.13 and 876 million yuan respectively, an increase of 22.2%, 20.7% and 22.8% respectively over the same period last year. The PE will be 1.65,1.99,2.45 yuan respectively, corresponding to 11.7x, 9.7x and 7.9x respectively, with a 6-month target price of 28 yuan.
Risk hint: the price of raw materials is rising, overseas sales are not as expected, and market competition is intensified.