\u3000\u30 China Baoan Group Co.Ltd(000009) 32 Hunan Valin Steel Co.Ltd(000932) )
Event: the company released a performance forecast on January 28. In 2021, the company is expected to realize a net profit attributable to the parent company of 9.5-9.9 billion yuan, a year-on-year increase of 49% – 55%. In the fourth quarter, the net profit attributable to the parent company was 1.736-2.136 billion yuan in a single quarter, with a year-on-year increase of 11% – 37%.
The company deepened reform and improved efficiency. The annual performance in 2021 reached the best level in history, and the profitability was stable in the fourth quarter. The company has firmly deepened reform and improved efficiency. The main technical and economic indicators such as average utilization coefficient of blast furnace and comprehensive iron consumption have reached the advanced level of the industry, and the annual business performance in 2021 is the best in history. In the fourth quarter of 2021, the company withstood the triple pressure of macro-economy, the rise of raw fuel prices and other external adverse factors. In a single quarter, it is expected to realize the net profit attributable to the parent company of RMB 1.736-2.136 billion, a slight decrease of 2.42% – 20.70% month on month, and the profit level is still relatively stable.
The product structure continued to be optimized, and the sales proportion of high-end varieties of steel increased to 55%. The sales volume and proportion of the company’s high value-added and high-tech varieties of steel have been increasing. In the first half of 2021, the company completed the sales volume of 7.52 million tons of varieties of steel, accounting for 55% of the company’s total sales volume, an increase of 3 percentage points over the whole year of 2020. The company is in a leading position in the market segments of bridge steel, marine steel and marine steel. Cold and hot medium and high carbon products have realized the import substitution of bimetal band saw, and high-end automotive steel such as connecting rod steel and gear steel has successfully entered new markets such as passenger car main engine plant.
In 2022, it is expected to add 150000 tons of pipe capacity for high-end construction machinery and 450000 tons of automobile sector capacity. The high-end engineering machinery pipe reconstruction project of 720 unit is expected to be put into operation in March 2022, with an annual rolling capacity of more than 150000 tons of new high-end steel pipes. The phase II project of automobile sector is expected to be put into operation in July 2022, and the annual production capacity will be increased by 450000 tons after completion.
The balance sheet continues to be repaired, and the rate of three fees continues to decline. By the end of the third quarter of 2021, the company’s asset liability ratio had dropped to 54.47%, a new low for more than a decade. Benefiting from the improvement of the financing environment, the company’s financial expenses continued to decline. In the first three quarters of 2021, the company’s three fee rate was only 1.96% (excluding R & D expenses), a record low.
Maintain the company’s buy rating, with a target price of 7.72 yuan. It is expected that the steel industry will maintain a high outlook, the company’s operating revenue will maintain a high level, the proportion of the company’s sales of high-end varieties of steel will increase, and the gross profit per ton of steel will increase. We adjust the company’s net profit attributable to the parent company from 2021 to 2023 to 9.6, 10.7 and 11.1 billion yuan (the original net profit attributable to the parent company from 2021 to 2022 was 7.48 billion yuan), and the corresponding EPS will be 140, 1.54 and 1.61 yuan. According to the valuation of 5 times PE of the comparable company in 22 years, Maintain the buy rating, and the target price is 7.72 yuan.
Risk tips
The growth rate of infrastructure real estate investment is lower than expected; The construction progress of high-end production line is less than expected; The prices of raw fuels such as iron ore and coking coal rose sharply.
