Event
In the first three quarters of 2016, the company achieved an operating income of 344 million yuan, an increase of 20.51% over the same period last year, and a net profit of 80 million yuan, an increase of 1.40% over the same period last year. In the third quarter, the company achieved an operating income of 145 million yuan, an increase of 33.35% over the same period last year, and a net profit of 29 million yuan, an increase of 7.08% over the same period last year.
Main points:
Revenue growth was slightly higher than expected, but the decline in product gross profit margin slowed profit growth.
The company's revenue grew by 20.51% in the first three quarters and Q3 grew by 33.35% in a single quarter, slightly exceeding expectations, mainly due to good sales growth of the deceleration clutch. However, affected by the slower growth of the downstream washing machine industry, competition in the deceleration clutch industry intensified, product prices fell, costs rose, resulting in a downward gross profit margin. From January to September, the company's operating costs increased by 28.37%, faster than revenue growth; the comprehensive gross profit margin of the product was 35.92%, down 9.93 percentage points from the same period last year. In terms of expenses, sales expenses increased by 37.74%, mainly due to the increase in packaging, transportation and handling costs driven by product sales. The sales expense rate was 3.61%, an increase of 0.45% over the same period last year; the management expense rate and financial expense rate decreased by 3.08% and 2.84% respectively. Overall, the intensification of competition in the industry and the decline in product gross profit margin are the main reasons for driving down the growth rate of net profit.
Leading technology, stable relationship with major customers, and guaranteed sales growth
Washing machine deceleration clutch industry is a highly market-oriented industry. Affected by the economic downturn, the growth rate of production and sales in the washing machine industry has been declining since 2011, basically below 5%. The depression in the downstream has brought pressure on the upstream parts industry, especially the competition for low-end products is becoming increasingly fierce, but the middle and high-end products are affected by patent protection and customer trust of downstream washing machines, the threshold is higher, and the sales situation is relatively optimistic. In order to cope with the downward cycle of the industry boom, on the one hand, the company through technological innovation, innovation products, research and production of high-quality, intelligent, environmentally friendly new products. In 2015, the company applied for 43 patents for invention and 28 patents for utility model. In 2015, the company obtained 6 patents for invention and 19 patents for utility model. As of December 31, 2015, the company has 33 patents for effective inventions and 62 patents for utility models, which are significantly ahead of competitors such as Zhejiang Samsung Mechatronics and Ningbo Poole Mechatronics. And in large-capacity, new wave wheel washing machine deceleration clutch technology development and application in the industry leading position. On the other hand, following the big customers, the company is mainly supporting Haier, Midea and Whirlpool, of which Haier accounts for more than 80%, and the customer relationship is stable. According to the 2015 sales data, Haier, Midea and Whirlpool's market share in washing machines reached 25.91%, 20.66% and 8.04% respectively, totaling more than 50%, which is the top3 of the washing machine industry. Judging from the sales in 2015 and the first half of 2016, Haier's washing machine business grew by 14.34% and 17.15% respectively; Midea's washing machine business grew by 20.46% and 30.62% respectively; and Whirlpool was basically flat. We believe that the company has technical and customer barriers, and although the industry is under pressure, it is expected to rely on big trees to share the growth dividends of major customers, and future sales growth is guaranteed.
Profit forecast and investment advice
We estimate that the operating income of the company from 2016 to 2018 is 4.62,5.54 and 665 million yuan respectively, the net profit is 1.09,1.19 and 135 million yuan respectively, and the EPS is 0.54,0.59,0.67 yuan respectively.
Considering the good sales growth, high technical barriers and stable customer relationship, the company will benefit from the upgrading of smart and green home appliances in the future, and the company's performance is expected to maintain steady growth. We give the company an "overweight" rating.
