\u3000\u3000 Shandong Donghong Pipe Industry Co.Ltd(603856) (603856)
China's composite pipeline head enterprise has a stable ownership structure. Founded in 2008 and listed on the Shanghai Stock Exchange in 2017, the company is a leading listed company in China's composite pipeline. The largest shareholder of the company is Shandong Donghong Group Co., Ltd. as of the end of the third quarter of 2021, Donghong group holds 50.83% of the shares of the company. The company's pipeline products include metal pipelines and non-metal pipelines, and the application fields cover industries and mines (coal mines, non coal mines, etc.), municipal (infrastructure construction, gas, water supply and drainage, comprehensive treatment of sewage, transformation of old urban pipe networks, integration of urban and rural water supply, etc.), large-scale water transfer projects and other fields.
Plastic pipes are widely used. The market scale of plastic pipes in the field of municipal engineering is about 26.5 billion yuan. Compared with other types of pipelines, plastic pipelines have significant economy, light weight, corrosion resistance and wide application range. They are mainly used in water supply pipelines, drainage pipelines, thermal pipelines and gas pipelines in municipal pipelines. In 2020, the output of China's plastic pipeline industry was 16.36 million tons, a year-on-year increase of + 2.25%. We estimate that in 2020, the consumption of municipal engineering plastic pipes in China will be about 2.94 million tons, and the market scale of municipal engineering plastic pipes industry will be about 26.5 billion yuan. With the development of policies, pipeline enterprises may usher in a development window period. At the central economic work conference in 2021, Xi Jinping general secretary gave relevant instructions to the urban pipe network, requiring that the pipeline reconstruction and construction must be taken as an important infrastructure project during the 14th Five Year Plan period. The importance of "steady growth" will increase in 2022. With the policy efforts of local governments in the fields of urban pipe network transformation, urban renewal and old community transformation, the downstream demand of pipeline enterprises may usher in marginal improvement. Due to the rapid rise of raw material prices, the margin of net profit margin of major pipeline enterprises decreased in the first three quarters of 21 years. Since 21q4, the price of raw materials has dropped significantly. It is judged that the profitability of pipeline enterprises may be marginally improved in 22 years.
The production capacity will be gradually released, providing new impetus for the company's revenue growth. In recent years, the company's production capacity has expanded rapidly, and the production and sales volume has increased rapidly. In 2020, the company's annual production of pipeline products was 170000 tons, a year-on-year increase of + 38.74%, and the annual sales volume reached 155900 tons, a year-on-year increase of + 27.36%. In 2021, the company's capacity scale increased significantly: by the end of 2020, the corresponding total output value of the company's capacity scale was only about 2.2 billion yuan; By the end of 2021, the company's capacity scale corresponds to a total output value of about 6-8 billion yuan. In 2022, the company's new production capacity may be gradually released, providing new driving force for the company's revenue growth.
Profit forecast, valuation and rating: we are optimistic about the company's competitive advantage in the main pipeline industry, and also optimistic that the company will usher in the double benefits of capacity release plus gross profit margin repair in 22 years, and will benefit from the policy force in the field of municipal pipeline. We predict that the net profit attributable to the parent company from 2021 to 2023 will be 126 million yuan, 393 million yuan and 540 million yuan respectively. The current price corresponds to the dynamic P / E ratio of 2022, which is 11x. The "buy" rating is given for the first time.
Risk warning: the risk of sharp rise in the price of upstream raw materials, the risk of infrastructure investment falling short of expectations, and the risk of capacity release falling short of expectations
