2020 performance is in line with our expectations

The company announced its 2020 results: operating income 938 million yuan, year-on-year + 8.6%; return net profit 205 million yuan, + 25.5% year-on-year, 0.34 yuan per share; deduction of non-return net profit 181 million yuan, year-on-year + 20.8% Tian 2020 dividend 0.11 yuan per share, dividend rate 32.4%.

Corresponding to 4Q20, the operating income is 289 million yuan, + 19.8% compared with the same period last year, and the net profit is 65 million yuan, + 24.2% compared with the same period last year; the net profit is 52 million yuan, + 19.4% compared with the same period last year.

The company's performance is basically in line with our expectations.

The domestic sales of washing machines recovered moderately, and the export performance was robust: 1) 1H20/2H20, domestic shipments of washing machines were-14.9% and 4.5% year-on-year, and export shipments were 5.4% of the same period last year, showing a trend of low before and high after. 1H20/2H20 Hanyu's domestic sales revenue from the same period last year was + 30.3% and its export revenue was 14.4% from the same period last year. 2) in 2020, the company's sales volume of general drainage pumps, special drainage pumps, condensate pumps and dishwasher washing circulating pumps were + 20.2%, respectively, compared with the same period last year. 8.1% and 2.6% respectively. Among them, the major customer of the special drainage pump is Whirlpool, and Whirlpool suffered a setback in its production activities under the influence of the epidemic, which led to a decline in the company's corresponding product sales.

Financial analysis: 1) year-on-year gross profit margin of 38.3%, year-on-year + 1.5ppt. Hanyu's products use aluminum instead of copper, and the company's product performance-price ratio is outstanding in the process of rapidly rising copper prices, which is reflected in 3Q20/4Q20 's gross profit margin of 40%, 39%, respectively, compared with the same period last year + 3.7ppt/+0.8ppt. 2) affected by the epidemic, employee travel expenses, hospitality expenses and advertising expenses decreased, while the company focused on enhancing the effectiveness of R & D. in 2020, the sales expense rate, management expense rate and R & D expense rate were 4.9% higher than those of the same period last year-1ppt/-0.8ppt/-1.1ppt to 5.8% / 5.1%. 3) the company recorded financial expenses of 2.72 million yuan in 2020, compared with 12.92 million yuan in 2019, mainly due to the increase in exchange losses and interest expenses of RMB appreciation. 4) due to the above effects, the company's net profit margin in 2020 was 21.8%, which was + 2.9ppt compared with the same period last year. 5) the bill receivable of the company at the end of 2020 was 115 million yuan, an increase of more than 10 times compared with the end of 2019, mainly due to the increase in domestic sales and the settlement of bank acceptance bills by customers. The increase in working capital also led to an 11% year-on-year decline in net operating cash flow to 187 million yuan.

Trend of development

In the short term, the domestic market of washing machines continued to recover moderately. Online and offline retail sales of washing machines from January to February 2021 were + 66% and 39% compared with the same period last year. Exports maintained a high boom, with household appliances exports of + 94% from January to February of 2021, an increase of 51% over the same period in 2019. In the long run: Hanyu's products to aluminum instead of copper, compared with competitors have dual advantages in performance and cost, and continue to improve production automation capacity, we believe that the company is a competitive home appliance accessories enterprises.

Profit forecast and valuation

Keep profit forecasts for 2021 and 2022 unchanged. The current share price corresponds to 17.5 times 2021 / 2022 / 16.3 times earnings. Maintain a neutral rating and a target price of 6.78 yuan, corresponding to 18.6 times 2021 price-to-earnings ratio and 17.3 times 2022 price-to-earnings ratio, which has 6.4% upward space compared with the current stock price.

Risk.

RMB exchange rate fluctuation risk; Sino-US trade friction risk; new business development risk