\u3000\u3 China Vanke Co.Ltd(000002) 182 Nanjing Yunhai Special Metals Co.Ltd(002182) )
Event: on March 15, 2022, the company released its 2021 annual report. In 2021, the company achieved a revenue of 8.117 billion yuan, a year-on-year increase of 36.5%; The net profit attributable to the parent company was 493 million yuan, a year-on-year increase of 102.2%; Net profit deducted from non parent company was 420 million yuan, with a year-on-year increase of 83.8%. In 2021q4, the company achieved a revenue of 2.464 billion yuan, a year-on-year increase of 31.4% and a month on month increase of 20%; The net profit attributable to the parent company was RMB 229 million, with a year-on-year increase of 217.3% and a month on month increase of 88.8%; Net profit deducted from non parent company was 198 million yuan, with a year-on-year increase of 165.3% and a month on month increase of 79.1%. The performance is in line with the previous forecast.
The company announced its business objectives for 2022: ① continuously promote the company’s automobile lightweight project. ② Accelerate the pace of intelligent transformation. The company is committed to improving the intelligence of magnesium production, greatly improving labor productivity, effectively saving the number of employees and improving the employment environment of employees under the condition of the same scale. ③ Use the combination of direct financing and indirect financing to meet the capital needs of the company’s development and operation.
In 2021, despite the impact of limited power production, the sales volume of the company’s products increased year-on-year, and the revenue and net profit attributable to the parent company also increased year-on-year; In terms of quarters, due to the sharp rise of magnesium price in the fourth quarter, the revenue and net profit of 2021q4 increased significantly month on month. In 2021, through the development of customers and lightweight applications, the sales volume of the company’s smelting and processing products increased by 19.6% year-on-year. Superimposed on the year-on-year increase of 78.1% in the average price of magnesium alloy in 2021 to 27478 yuan / ton, the volume and price increased simultaneously, and the company’s revenue increased by 36.5% year-on-year.
In 2021q4, the company’s net profit attributable to the parent company increased year-on-year and month on month. In terms of spin off, the increase of net profit attributable to the parent company is mainly due to the increase of gross profit, which may be mainly due to the sharp rise of product prices. In 2021q4, the average price of magnesium ingot, magnesium alloy and aluminum alloy increased by 190%, 170% and 27% year-on-year, 46%, 44% and 0.14% month on month respectively. As the raw material end of magnesium ingot, the price of ferrosilicon Q4 increased by 67% year-on-year and only 3.1% month on month. The price difference is gradually widening and the unit profit space is expanding. On a month on month basis, in addition to gross profit, other profit increasing points include taxes and surcharges (+ 92.64 million yuan). The main profit reducing points are impairment loss (- 18.56 million yuan), other / investment income (- 14.43 million yuan), minority shareholders’ profit and loss (- 8.65 million yuan), non operating profit (- 3.02 million yuan), income tax (- 640000 yuan) and changes in fair value (- 110000 yuan).
As of March 15, 2021, according to our calculation, the gross profit of magnesium smelting is 23541 yuan / ton, and the profit of magnesium remains high. On the one hand, with the gradual production of the project: ① 50000 tons of raw magnesium in Chaohu; ② Wutai project; ③ Yunxin master alloy; ④ With the gradual commissioning of Qingyang and other projects, the company’s production capacity from upstream raw materials to downstream die castings has been improved. On the other hand, with the gradual increase of the penetration rate of downstream magnesium alloys, the continuous overweight of the company’s deep processing and the resource docking of Baosteel, the company’s profitability is expected to continue to improve in the future.
Investment suggestion: with the gradual production of Chaohu, Wutai, Qingyang and other projects, the company’s production capacity in the field of original magnesium, magnesium alloy and magnesium deep processing will usher in growth. We expect that the company will realize net profit attributable to the parent company of 1.026 billion yuan, 1.184 billion yuan and 1.391 billion yuan from 2022 to 2024, with EPS of 1.59 yuan, 1.83 yuan and 2.15 yuan respectively. The PE corresponding to the closing price on March 15 is 12, 11 and 9 times respectively. It is covered for the first time and given a “recommended” rating.
Risk tip: the price of magnesium has fallen sharply, the progress of the project is less than expected, and the demand growth is less than expected.
