Global leader in contract manufacturing of clean electrical appliances. The company is a domestic head cleaning electrical contract manufacturer, deeply bound with the world-famous vacuum cleaner brand Shark (the company is the largest supplier of Shark), and has the ability to design and manufacture core components (the company is the designated motor supplier of Dyson). In 2021, the company's income and net profit were 2.601 billion yuan, an increase of 24.14% and 34.53%.
The company's highlight one: r & D innovation + vertical supply chain to ensure the competitiveness of OEM. The company has a strong ability of independent research and development and industrial design, and has invented the original rolling brush hair cutting technology in the industry, which can better solve the wound pain points of the bristles when the products are used. Patents have been registered in China, the United States and the United Kingdom. At the same time, the company has the design and manufacturing capacity of vacuum cleaner core components motor and PCBA, and is the designated motor supplier of Dyson.
From 2018 to 2021, the company's self-made ratio of motor and PCBA has always been stable at about 80% and 70%.
The second highlight of the company: the devaluation of RMB in 2022 brings short-term profit flexibility. The company has a high proportion of export income (86 + in 2021), which is greatly affected by exchange rate fluctuations and tariff exemptions. In terms of exchange rate fluctuations, RMB depreciation is mainly good for the company's financial performance from two angles: thickening the converted income-performance, and increasing exchange gains and losses. 1) from the perspective of order income conversion, we estimate that the devaluation of RMB is expected to increase income and performance in 2022. The thickening rate of Q2 in a single quarter is higher than that of the whole year. 2) from the perspective of exchange earnings, assuming that the amount of the US dollar currency project in 2022 is the same as that at the end of 2021, the current exchange rate level may increase the company's exchange earnings by 31.95 million yuan. In terms of tariff exemption, we estimate that the negative impact of the tariff increase in 2019 on the performance side is about 18.8%. Considering that the company did not share the tariff pressure with the brands through product price reduction in 2021, the 2022 tariff exemption policy may not have a significant thickening effect on the performance side of the company.
The third highlight of the company: the new business is expected to open up a second growth curve. The company has laid out popular categories of floor washers, including JS Global Lifestyle Company Limited and Fang Tai, which are launched this year. Sales end: the capacity of the floor washer is rapidly expanded downstream, and the short-term / long-term sales space is expected to be 4 times / 10 times. At present, the industry is still in the leading stage of product strategy, and the short-term new brand is expected to rapidly increase its share by virtue of product differentiation to further catalyze the OEM demand of floor washing machines. Manufacturing end: at this stage, in addition to the head brand can be self-produced, most of the other washing machine brands are OEM production. Under the trend of intensified competition in the industry, it is expected that the demand for foundry of floor washing machines will continue to increase, and production costs and production capacity will be the core competitiveness of the foundry. We estimate that the industrial scale in the 2025s is expected to reach nearly 8 billion yuan, and the company's entry into the OEM of the ground washer is expected to open up the second growth curve.
Profit expectations and investment advice. As the head manufacturer of clean electrical appliances, the company has the advantages of scale, self-matching ability and R & D advantages. with the expansion of new business & new customers downstream of clean electrical appliances, the company will open a broader growth space. We expect the company's net profit in 2022 to 2024 to be 333 million yuan, an increase of 43.65%, 24.53% and 22.58%. We believe that the reasonable market capitalization of the company in 2022 is 9 billion yuan, corresponding to about 27 times PE, which is still 16.6% more than the market capitalization of 7.707 billion yuan on May 20. It is covered for the first time and rated as "overweight".
Risk tips: downstream prosperity of clean appliances is declining, new business and new customer expansion is not as expected, raw material prices continue to rise, Vietnam policy changes, important customer order transfer risk