ZHEJIANG DINGLI-A(603338):SOLID EARNINGS GROWTH IN 4Q21 & 1Q22; HISTORICAL LOW VALUATION OFFERS BUYING OPPORTUNITY

类别:公司 机构:招银国际证券有限公司 研究员:Wayne Fung 日期:2022-04-29

Dingli’s net profit in 2021 grew 33% YoY to RMB884mn, 5%/1% below our/consensus estimate due to slightly higher-than-expected operating expense and lower other income. In 1Q22, net profit grew 15% YoY to RMB196mn, which is largely in line with our expectation. It’s encouraging to see that gross margin in both 4Q21 and 1Q22 improved from 2Q21 and 3Q21, suggesting solid pricing power amid the competitive market. We revise down our earnings forecast in 2022/23E by 4%/5%, largely due to higher expense ratio. We expect Dingli will continue to benefit from the capex spending growth by Horizon Construction. We also expect the depreciation of RMB will help boost export. We revise down our TP to RMB51, based on 23x P/E on the back of 23% earnings CAGR in 2022E- 24E. Current share price implies only 15x 2022E P/E (historical low), while our target multiple of 23x is 1SD below the historical average of 33x. Maintain BUY.

    4Q21 results highlights. Revenue grew 96% YoY to RMB944mn in 4Q21, thanks to the low base effect (a temporary slowdown of customers’ orders in 4Q20)。 Gross margin expanded 10.3ppt YoY and 7.5ppt QoQ to 34%, driven by better product mix. Administrative expense (including R&D) increased by 105% YoY while other income dropped 69% YoY, slightly below our expectation. Net profit still surged 2.5x YoY to RMB155mn in 4Q21. Operating cash flow reached RMB354mn in 4Q21 (vs -RMB11mn in 4Q20)。 For the full year, net profit grew 33% YoY to RMB884mn. Proposed dividend of RMB0.34/share implies 19.5% payout ratio (slightly increased from 19% in 2020)。

    Strong sales volume growth in 2021. Total aerial working platform (AWP) sales increased 36% YoY to 51.7k units in 2021. We estimate this represented 32% market share in China and the export market. Sales volume of boom lift surged 1.8x YoY to 3.9k units as Dingli continued to ramp up the new capacity.

    Decent earnings growth in 1Q22: Revenue grew 49% YoY to RMB1.2bn.

    Gross margin slightly narrowed 0.8ppt YoY to 29.2% which we think is resilient given the keen competition. Net profit increased 15% YoY to RMB196mn as the administrative expense ratio increased while net finance expense was recognized (vs net finance income in 1Q21)。

    Risks: (1) Price competition in China AWP market; (2) unexpected slowdown of construction activities in China; (3) further increase in freight rate.