Zhejiang Yongjin Metal Technology Co.Ltd(603995) (603995)
The leader of cold rolled stainless steel plate processing has evolved to the high end, and the production capacity and output are accelerated
The company is the leader and the only listed company of precision stainless steel cold rolled sheet in China. It has self-developed production equipment and more than ten years of technical patent reserves. The compound growth rate of production capacity under construction in the next three years is 24.81%, and the compound growth rate of warehousing output in the next three years is 24.71%. At present, the production capacity is still expanding;
The company’s product structure continues to be optimized. The proportion of precision plate production capacity is expected to increase from 8.75% in 2020 to 27.49% in 2023. Precision plate and 400 series wide plate have higher gross profit margin, and their output proportion is expected to increase from 13.33% in 2020 to 26.11% in 2023, driving the company’s gross profit margin to increase from 5.16% in 2020 to 5.81% in 2023;
Layout upstream, develop downstream, and take the lead in cost control in the industry
The production mode of setting production by sales and the sales pricing mode of cost plus make the company’s performance less affected by the upstream and downstream cycles. The company is deeply bound with Qingshan group, the main upstream supplier, to jointly build Fujian Yongjin and acquire qingtuo Shangke, resulting in a significant increase in the stability of profitability;
Under the background of the expansion of sales scale and the increase of R & D expenses, the proportion of four expenses in operating revenue still decreased steadily, and the proportion of four expenses decreased to 1.75% in the first three quarters of 2021, the lowest level since 2015: the company issued 1 billion yuan of convertible bonds in December to further reduce the financing cost;
The industry pattern is clear and the competitive advantage is obvious
The company ranks first in the output of precision cold rolled sheet and third in the output of wide cold rolled sheet in China. Compared with industrial enterprises, Yongjin has higher turnover rate and stronger cost control ability, takes a significant lead in revenue growth, capital turnover rate, inventory turnover rate and business cycle, and maintains a stable level of gross profit rate and net interest rate;
Demand is rising steadily and there is broad space for development
Cold rolled stainless steel sheet and strip are widely used in auto parts and decorative materials. By 2025, China’s auto production is expected to reach about 35 million, and the auto production and sales scale gagr will reach 7.28% in five years, driving the continuous recovery of relevant stainless steel demand;
The real estate completion is expected to improve. The year-on-year growth rate of the completed residential area that hit the bottom in 2020 will reach the peak level in 2021, and the demand for downstream household appliances is expected to maintain a high growth state from 2022 to 2023; With the gradual stabilization of the real estate policy, the implementation of the policy of home appliances going to the countryside and the gradual increase of the proportion of residential fine decoration, the demand for home appliances such as downstream air conditioners, color televisions, refrigerators and washing machines and the demand for building decoration are expected to grow steadily;
Investment suggestion: the company focuses on the stainless steel cold rolled plate processing industry. Self developed equipment, high turnover and precision share increase create competitive advantages. The substantial growth of production capacity and the high certainty of downstream demand give the company long-term growth momentum. It is expected that the company’s business scale and profit are expected to enter the stage of rapid growth, It is estimated that the company’s net profit attributable to the parent company in 2021, 2022 and 2023 will be 580 million / 860 million / 1.18 billion respectively, and the corresponding EPS will be 2.5 yuan / 3.69 yuan / 5.07 yuan. Combined with the valuation level of comparable companies, the company’s target market value in 2022 will be 15.48 billion yuan. At present, the company’s market value does not fully reflect its internal value, and is covered with a “buy” rating for the first time.
Risk tip: due to the price change of upstream stainless steel raw materials and the rapid increase of production capacity, the cost increases more than expected, and the demand for stainless steel plates is less than expected;
