I. Overview of events
On April 20, 2021, the company released its annual report in 2020 and quarterly report in 2011. the company realized operating income of 2.255 billion yuan in 2020, an increase of 56.38% over the same period last year, and a net profit of 516 million yuan, an increase of 50.82%. In the first quarter of 2021, the company achieved revenue of 895 million yuan, an increase of 134.19% over the same period last year, and realized a net profit of 196 million yuan, an increase of 127.88% over the same period last year.
II. Analysis and judgment
The annual performance is growing steadily, and the performance of Q1 is outstanding.
The company's revenue in 2020 was 2.255 billion yuan, and the growth rate of revenue and net profit exceeded 50% compared with the same period last year, of which the revenue of hydraulic crushing hammer was 1.284 billion yuan, up 25.98% over the same period last year, and the revenue of hydraulic parts was 942 million yuan, up 130.60% over the same period last year. The reason for the company's steady revenue growth in 2020 is the strong terminal demand in the construction machinery industry, the strong competitiveness of the company's main products, and the increase in sales. In the first quarter of 2021, the company's revenue and return net profit grew at a remarkable rate of 134.19% and 127.88% respectively. The high increase in operating income was mainly due to the company's strengthening cooperation with well-known mainframe factories and the gradual increase in sales of large hydraulic crushing hammers and hydraulic parts.
Profit margin has declined slightly, and the ability to control expenses has been continuously optimized.
The company's gross profit margin in 2020 was 39.96%, a decrease of 2.34% compared with the same period last year, in which the gross profit margin of hydraulic crushing hammer and hydraulic parts was 44.61% and 33.64% respectively, which decreased by 2.23% and increased by 2.64% and 22.87% respectively over the previous year. Q1's gross profit margin decreased by 0.84% in 2021 and 36.83% in 2021, which is 3.62% lower than the same period last year. The slight decline in the company's profit margin is mainly related to the change in the sales structure of the company's products. In 2020, the company's sales expense rate and management expense rate were 4.09% and 3.84%, respectively, which was 1.75% and 0.70% lower than the same period last year. In 2021, the Q1 sales expense rate and management expense rate were 3.48% and 2.46%, respectively, and 1.66% and 3.47% less than the same period last year. In terms of cash flow, the operating cash flow in 2020 was 334 million yuan, a significant increase over last year, due to the growth of the company's operating income and the strengthening of the management of accounts receivable.
The import substitution of high-end hydraulic parts is accelerated, and the company's industry leadership is expected to continue to benefit. At present, China's hydraulic parts industry presents a situation of structural surplus of ordinary hydraulic parts and structural shortage of high-end hydraulic parts, and high-end hydraulic parts mostly rely on imports. At present, the global market is monopolized by a few hydraulic production enterprises, such as Bosch Rexroth and Kawasaki heavy Industries, and occupies a considerable share in the domestic market. As one of the few domestic enterprises to achieve mass production of high-end hydraulic parts, the company actively increases the number of major customers and expand new customers by strengthening cooperation with well-known mainframe manufacturers of construction machinery, and its market share continues to rise; at the same time, imports are blocked under the influence of overseas epidemic situation, the localization of hydraulic parts ushered in a valuable window period, and it is expected that the company's market share will continue to increase under import substitution.
There is a broad space to improve the allocation rate of excavating machinery, and the hydraulic crushing hammer market maintains a high bearing. According to the statistics of the excavating Machinery Branch of China Construction Machinery Industry Association, there are about 1.825 million excavators in China in 10 years at the end of 2020. the growth of the excavator market in the future will drive the hydraulic crushing hammer market to maintain a high boom. By the end of 2020, the configuration rate of domestic excavating machinery equipment is only about 30%, which is quite different from that of the mature market, in which the allocation rate of excavator crushing hammer is 25%, 30%, which is lower than the mature market level of 30%, 40%. The hydraulic breaking equipment market still has great potential. The company is the absolute leader of the domestic crushing hammer industry, currently about 60% capacity supply mainframe factory, customers including Sany, Xugong and other well-known brands, hydraulic crushing hammer market boom, the company as a market leader is expected to continue to benefit.
III. Investment suggestions
Benefiting from the domestic replacement acceleration of hydraulic parts and the high demeanor of the hydraulic crushing hammer market, in the long run, we believe that the company's performance will maintain rapid growth. It is estimated that in 2021-2023, the company will achieve a revenue of 33.35 pounds, a net profit of 7.51 million, and a net profit of 10.26 million yuan. The current stock price corresponds to a PE of 46.9, 34.4 and 25.6 times. The company's 2022 valuation level is below the historical valuation center of 45.36X, and there is still room for improvement in the long run, maintaining the "recommended" rating.
Fourth, risk tips:
Market competition intensifies, infrastructure deficiencies fall short of expectations, and new product capacity falls short of expectations.