The company released the 2020 annual report: the income in 2020 was 13.84 billion yuan, an increase of 564.3% over the same period last year; the net profit was 7.01 billion yuan, an increase of 3829.6% over the same period last year; and the net profit after deducting non-return was 7.01 billion yuan, an increase of 4045.1% over the same period last year.
The rise in the volume and price of disposable gloves has driven the performance of the company: the epidemic situation at home and abroad has led to a surge in demand for disposable gloves, the company continues to increase production input to supply the global market, and the volume and price of disposable gloves business has risen side by side, thus further improving the global market share and brand awareness. In terms of sales, personal protection products based on disposable gloves contributed 13.45 billion (year-on-year + 660.2%); disposable glove sales of 24.76 billion (year-on-year + 50.3%); and production capacity of 36 billion disposable gloves at the end of 2020 (year-on-year + 89.5%). Thanks to the obvious increase in the price of gloves when the industry was in short supply, the company's gross profit margin and net profit margin increased significantly during the reporting period, increasing by 44% and 42% respectively compared with the same period last year; the sales expense rate and management expense rate decreased by 4.0% and 2.4% respectively compared with the same period last year; mainly affected by the increase in exchange rate fluctuations and exchange losses, the financial expense rate increased by 0.8% year-on-year.
The epidemic accelerates the development of the glove industry, and the long-term demand continues to be strong: based on the enhancement of people's awareness of health protection, the regulation of the use of gloves by governments and industries, and the strategic reserves of relevant departments, we believe that the disposable glove industry will continue to grow in the post-epidemic era. According to Frost Sullivan, global sales of disposable gloves are expected to increase from 530 billion in 2019 to 1.29 trillion in 2025 (a compound growth rate of 15.9 per cent). Compared with the global supply-side situation where the proportion of old capacity is high and the new capacity has yet to be expanded, the disposable glove market is expected to continue to fall short of demand and the industry demand continues to be exuberant.
Seize the opportunity of industry development and accelerate production expansion to become a global leader: according to the information of Malaysia Glove Industry Association, the employment rate of Malaysian disposable glove factory and related supporting industry chain have been damaged under the epidemic, and the supply of gloves is under pressure stage by stage. The company is the leader in the domestic disposable glove industry. Compared with overseas traditional glove factories, the company has the cost advantages of nitrile raw materials, land and energy, the talent advantage under the engineer dividend and the advantage of Chinese manufacturing industry. The company continues to expand production and accelerate to become a global leader, with a production capacity of about 36 billion disposable protective gloves at the end of 2020, and the total production capacity is expected to reach 120 billion in the next 12 to 15 months. In addition, the company launched its listing in Hong Kong in January 2021, and if the issue is successful, it is expected to further strengthen its financial strength to support sustainable development in the future.
Profit forecast and investment advice: global disposable gloves are in short supply, and the company has obvious advantages in stable supply capacity and new capacity construction, taking the lead in the knockout stages of old capacity and new capacity under the epidemic. At the same time, the high performance is expected to accelerate to become the global glove leader. We expect the company's 2021-2023 net profit to be 14.14 billion yuan, 8.74 billion yuan and 8.25 billion yuan respectively, corresponding to PE 4.9x, 8.0x and 8.5x respectively, maintaining the "buy" rating.
Risk tips: production expansion is not as expected, the demand for disposable gloves is reduced, and the price of raw materials has risen sharply.
