\u3000\u3 China Vanke Co.Ltd(000002) 541 Anhui Honglu Steel Construction(Group) Co.Ltd(002541) )
“Hong” Tuhua structure is the strongest voice in the steel structure industry.
The company is a leader in the steel structure industry and has the highest qualification of private enterprises. In 2021, the output reached 3.67 million tons, realizing “10000 tons per day”, which is far ahead in the industry. The scale is huge and growing rapidly. The growth rate of net profit attributable to the parent company has remained above 34% in the past five years.
Reshaping the business model opens the door to growth. The company has the most growing business model in the industry. At first, it was a traditional enterprise that paid equal attention to steel structure manufacturing and engineering services, and gradually turned to manufacturing. In 2021, all new contracts were signed for materials. Through the determined accounts receivable control to downstream customers and the generous payment proportion to the upstream, the company runs through the industrial chain with faster cash turnover and lower price, making the manufacturing mode a good business.
There are too many orders: the amount of new contracts signed by the company continues to increase. In 2021, new orders increased by 32.22% year-on-year, continuing to lead the industry. The secret lies in the product price advantage + strong performance ability, which makes the demand for orders rise. The average price of new contracts signed by the company in each quarter is more than 1000 yuan / ton lower than the information price of the cost department in the same period.
Continuous capacity expansion: the company expects the capacity to reach 5 million tons by the end of 2022, an increase of more than 12 times compared with 410000 tons at the beginning of listing. At present, it has ten production bases all over Anhui, Henan, Hubei and Chongqing.
Huge advantages of expansion investment: the capital and working capital invested per unit capacity are lower than those of the industry, of which the working capital investment per unit output only needs 1088 yuan / ton, which is 181 million yuan less than that of the second enterprise in the industry for every 100000 tons of expansion.
The company’s production capacity scale and business model have built strong barriers, forming a full chain cost advantage through procurement, manufacturing and management. New entrants will learn to imitate deliberately in Handan. In 2020, the manufacturing cost of the company’s steel structure will be as low as 3778 yuan / ton. Combined with the pricing strategy of the company (material price + processing fee), the selling price is even lower than the manufacturing cost of some enterprises.
Procurement: by virtue of its strong cash collection ability, it purchases in batches from steel mills, bypasses dealers and reduces procurement costs. In 2019, the steel procurement unit price is about 629 yuan / ton lower than that of friends.
Manufacturing: unit depreciation, transportation and labor costs have been reduced, and scale advantages have emerged.
Management: the centralization of management functions leads to the rapid dilution of period expenses and the continuous deepening of cost advantages. In 2021, the unit product period cost of H1 company decreased to 280 yuan / ton, a decrease of 43 yuan / ton compared with 20 years.
Profitability is still in the rising channel. The company has achieved high growth and continued to optimize the return on assets. The company’s net profit per ton in 2021 reached 342 yuan / ton. Roe has a steep upward trend, and the marginal return of new capacity is increasing. With the continuous production of new capacity in the future, the company’s large-scale dividends will continue to be realized, and the improvement trend of roe is expected to continue.
The steel structure industry shoulders the historical mission of carbon neutralization, adjustment and upgrading of the steel industry and transformation of the construction industry, and the annual growth rate is expected to remain above 10%. In 2022, government invested industrial park projects and public buildings have become an important starting point for steady growth, and steel structures have great prospects. At present, the total market share of the five listed companies is less than 6%, the market space is broad, the development direction of enterprises in the industry continues to divide, and the industry pattern of Honglu’s sudden rise will continue.
We are optimistic about the company’s superior business model, enjoy dividends in the growth of the industry, and increase both quantity and price. The output continues to grow steadily and the market share increases significantly. The output is expected to reach 4.24 million tons and 5.09 million tons from 2022 to 2023. We are optimistic that the profitability of unit products will continue to improve, the scale dividend will continue to be realized, the comprehensive cost will continue to be diluted, and the unit net profit will continue to grow.
The net profit of the company is expected to be RMB 6.7 billion and RMB 1.82 billion in 2022 and RMB 1.8 billion in 2022 respectively. The current P / E ratio is 17.76 times, 14.02 times and 11.41 times respectively. “Buy” rating is given for the first time.
Risk tip: the investment in fixed assets shrank, the penetration rate of steel structure declined, and the orders obtained by the manufacturing mode were less than expected.
