occurrences
Jiuxing released sales figures for the fourth quarter of 2020 on January 14, 2021. Total sales for the fourth quarter of 2020 fell 18.9% year over year to $280.1 million, and core manufacturing business sales fell 18.8% year over year. Compared to a 29% year-on-year decline in sales in the first nine months of 2020, the decline in the fourth quarter of 2020 narrowed somewhat. The total sales amount for the full year of 2020 was 7% higher than the Centre's forecast, due to the fact that shipments in the fourth quarter of 2020 were superior to expectations.
Research Center Perspective
Compared to the 29% year-on-year decline in sales in the first nine months of 2020, the decline in the fourth quarter of 2020 (18.9% year-on-year decrease) narrowed: although Jiuxing's shipments in the fourth quarter of 2020 fell 21.7% year on year, its full-year shipment volume in 2020 reached 43.4 million yuan, better than the previous forecast of 3900-41 million yuan. Due to the high demand for products, some products that were originally scheduled to be delivered in the 1st quarter of 2021 were delivered in the 4th quarter of 2020. This made sales for the fourth quarter of 2020 and the full year of 2020 better than anticipated.
The outlook for 2021 is positive: Due to uncertain business development prospects, Jiuxing management expects the shipment volume for the first half of 2021 to increase by about 10% year-on-year (about 22 million yuan), but no forecast for the second half of 2021 has been provided. This is equivalent to the 21% year-on-year increase in Jiuxing's shipment volume in the second half of 2021 to achieve the center's current forecast of shipping volume of 50 million yuan for the full year of 2021. Thanks to the introduction of the novel coronavirus vaccine and the favorable base effect (23% year-on-year decrease in the second half of 2020), we believe this prediction is likely to come true.
Reiterating the buying review: The Center expects a strong rebound in Jiuxing's earnings in 2021. Furthermore, our 2020 profit forecast did not change because the difference between the Center's 2020 net profit forecast (loss of 4 million US dollars) and the latest forecast (profit reached 0-5 million US dollars) was small. Our target price is based on projected earnings estimates for 2021. Jiuxing's current stock price is equivalent to 11.3 times the estimated price-earnings ratio in 2021, and the price-earnings ratio range for the past 5 years is 6.7 times to 15.3 times.