\u3000\u30 Shenzhen Quanxinhao Co.Ltd(000007) 08 Citic Pacific Special Steel Group Co.Ltd(000708) )
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Event overview: on March 10, the company released its 2021 annual report: in 2021, the net profit attributable to the parent company was 7.953 billion yuan, a year-on-year increase of + 31.84%, and the net profit attributable to the parent company after deduction of non-profit was 7.821 billion yuan, a year-on-year increase of + 33.85%. Quarterly, the net profit attributable to the parent company of 2021q4 was 1.891 billion yuan, Q3 + 0.91% month on month; Net profit deducted from non parent company was 1.843 billion yuan, with Q3 + 0.32% month on month, and the performance was in line with expectations.
Comments: the company’s product structure was optimized, and the sales volume of “three high and one special” products maintained high growth
① volume: in 2021, the sales volume of steel products increased by 3.87% year-on-year, of which the “three high and one special” maintained a high growth. In 2021, the output of steel products of the company was 149993 million tons, a year-on-year increase of + 3.27%, and the sales volume was 145341 million tons, a year-on-year increase of + 3.87%. Quarterly, the company achieved a sales volume of 3.5643 million tons in 2021q4, a month on month increase of Q3 + 4.21%. In terms of product structure, the “three high and one special” products continue to make efforts. In 2021, the sales volume of ultra-high strength steel is + 62.7%, the sales volume of high temperature / corrosion resistant alloy is + 44.66% and the sales volume of special stainless steel is + 113.25% year-on-year. The company’s product structure is continuously optimized.
② price: the cost of raw materials rose sharply, and the gross profit margin decreased slightly by 0.51pct. In 2021, the price of main raw materials iron ore was + 46.50%, the price of coke was + 46.14% and the price of scrap steel was + 29.90% year-on-year. The average selling price of the company’s products was 669683 yuan / ton, which was + 22.83% year-on-year, far lower than the increase of raw materials. However, the company continued to reduce costs and increase efficiency, superimposed with the large volume of “three high and one special” products, and the gross profit margin fell only slightly by 0.51pct to 17.12% in 2021.
Future core focus
① in the 14th five year plan, the annual output of special steel will exceed 20 million tons. During the “14th five year plan” period of the company’s development strategic plan, the annual output of special steel will exceed 20 million tons. Among them, the company plans to realize the sales volume of 14.9 million tons in 2022 and strive to reach 15.5 million tons, with a year-on-year increase of 2.52% to 6.65% in 2021.
② with the successful issuance of 5 billion convertible bonds, the layout of high-end products is expected to accelerate. In February 2022, the company successfully issued 5 billion yuan of convertible bonds. The raised funds are mainly invested in the “three high and one special” and other projects focused on the development of the company. Among them, the special metallurgical forging product upgrading project (phase II) plans to have a production capacity of 39000 tons of “three high and one special” products, and the special metallurgical forging product upgrading project (phase III) plans to have a production capacity of 52000 tons of “three high and one special” products. Under the background of accelerated import substitution of high-end steel materials in aerospace, energy and other fields, the development space of high-end product projects planned by the company is broad.
③ the scale synergy effect of seamless steel pipe sector can be expected. At the beginning of 2021, the company won 40% of the equity of Shanghai Electric Group Company Limited(601727) Group Steel Pipe Co., Ltd. from Shanghai Electric Group Company Limited(601727) Group Co., Ltd. its core asset is the production capacity of 3.5 million tons of seamless steel pipe of Tianjin Steel Pipe Manufacturing Co., Ltd. the company has fully participated in the production, operation and management. At present, the production capacity of seamless steel pipe that can be managed and agreed by the company has reached 5 million tons, ranking first in the world.
Investment suggestion: the company is the world’s leading professional manufacturer of special steel materials. With the gradual operation of the “three high and one special” upgrading and transformation project in the future, the company’s product structure will be further optimized. We expect that the net profit attributable to the parent company from 2022 to 2024 will be RMB 9.276109.15/12.646 billion, corresponding to the closing price of RMB 20.13 on March 10, 2022, and PE will be 11 / 9 / 8 times from 2022 to 2024, maintaining the “recommended” rating of the company.
Risk warning: downstream demand is less than expected; The price rise of raw materials exceeded expectations; The project is not progressing as expected.
