2022-03-21 BOCI Securities Co., Ltd Zhu Peng researched and issued a research report on Fuyao Glass, "Rapid Revenue Growth, Short-term Drag on Results from Exchange and Freight, etc. This report gives a Buy rating on Fuyao Glass with a current share price of RMB 35.31.
The company released its 2021 annual report, with annual revenue of 23.60 billion yuan, up 18.6% year-on-year; net profit attributable to the mother of 3.15 billion yuan, up 21.0% year-on-year; earnings per share of 1.23 yuan, with a proposed cash dividend of 10 yuan per 10 shares (tax included). Revenue growth is in line with expectations, exchange losses and freight costs are a short-term drag on performance. 2022 chip shortage is expected to gradually ease, domestic and international auto sales may pick up and help the company's performance. The company's market share continues to increase, product structure improvement plus category expansion, value volume continues to increase, the development prospects are positive. We expect the company's earnings per share for 2022-2024 to be $1.60, $1.93 and $2.30, respectively, and maintain a buy rating.
Key points to support the rating
Rapid revenue growth, short-term drag on performance from foreign exchange and freight costs, etc. The impact of the epidemic will subside in 2021, with domestic passenger car production increasing by 7.1% according to CCA. The company achieved revenue of 23.60 billion yuan (+18.6%) and continued to improve market share; achieved net profit attributable to the mother of 3.15 billion yuan (+21.0%), with short-term drag on performance from foreign exchange losses (530 million yuan), freight costs (+230 million yuan) and raw material price increases (110 million yuan). Gross profit margin for the year was 35.9%, down 0.6 pct year-on-year, mainly due to the impact of shipping costs and soda ash price increase of 0.98 pct and 0.45 pct respectively. sales and management expense ratios decreased by 0.4 pct and 1.3 pct respectively, R&D expense ratio increased slightly by 0.1 pct, financial expenses increased by 39.0% (exchange loss increased by 110 million yuan), and the four expense ratios decreased by 1.2 pct, better cost control. 21Q4 affected by chip shortage, domestic passenger car production decreased by 0.3%, the company's revenue of 6.45 billion yuan (+5.2%) outperformed the industry, gross margin was relatively stable, but the impact of RMB appreciation, FYSAM one-time costs, raw material price increases, etc., attributable net profit of 550 million yuan (-37.3%).
Passenger car sales gradually pick up, market share continues to improve. 2022 chip shortage is expected to gradually ease, coupled with replenishment and other needs, domestic and international auto sales may grow faster, driving the company's performance. With the reshaping of the global auto glass industry under the influence of the new crown epidemic and the closure of some competitors' European factories, the company's auto glass revenue growth rate will exceed the industry by about 15 pct in 2021, and its global market share will reach 31%, up 3 pct from the previous year, and is expected to reach 35% in 2023. Trends such as low carbon and environmental protection will also drive the rapid development of the auto glass industry. Domestic and international auto sales are picking up and raw material prices are falling back, which, together with the company's increased share, is expected to drive sustained growth in performance.
The company's high value-added products accounted for about 3.3 pct in 2021, and the ASP of auto glass increased by 3.8 pct. The proportion of canopy glass in the application of new energy vehicles is increasing, coupled with Low-E coating dimming and other functional applications, the added value is increasing, which is expected to promote the continuous growth of ASP. Short-term performance under pressure, but product advantages recognized by domestic and foreign customers, 2021 and 2022 January-February new orders of about 3 billion yuan, 1 billion yuan, the follow-up is expected to turn losses into profits, the development prospects are promising.
Considering the impact of freight and raw material price increases, we adjust our earnings forecast and expect the company's earnings per share to be $1.60, $1.93 and $2.30 for 2022-2024, respectively, maintaining our Buy rating.
Major Risks to Ratings
1) lower-than-expected auto sales; 2) significant product price cuts; and 3) rising costs of raw materials and other materials.
According to the data of research reports released in the past three years, the research team of Ren Danlin of CICC has conducted in-depth research on the stock, with an average forecast accuracy of 99.95% in the past three years, and its forecast net profit attributable to 2021 is 3.827 billion, with a forecast PE of 24.02 based on the current price.
The latest earnings forecast breakdown is as follows.
The stock has been rated by 19 institutions in the last 90 days, with 15 buy ratings and 4 hold ratings; the average institutional target price in the last 90 days is 55.48. The Stock Star valuation analysis tool shows that Fuyao Glass (600660) has a good company rating of 3 stars, a good price rating of 3 stars, and a valuation composite rating of 3 stars. (Rating range: 1 ~ 5 stars, maximum 5 stars)
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