\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 677 Henan Mingtai Al.Industrial Co.Ltd(601677) )
Event: on March 19, 2022, the company released its 2021 annual report. In 2021, the company realized a revenue of 24.61 billion yuan, an increase of 50.7%, a net profit attributable to the parent company of 1.85 billion yuan, an increase of 73.1%, a deduction of non attributable net profit of 1.59 billion yuan, an increase of 96.7%, and a net operating cash flow of 2.07 billion yuan; In a single quarter, the revenue of 2021q4 was 7.56 billion yuan, an increase of 20.23% and 57.3% respectively. The net profit attributable to the parent company was 450 million yuan, a decrease of 19.2% and a increase of 28.1% respectively. The net operating cash flow was 553 million yuan, a decrease of 20.0%.
With the high growth of revenue, the gross profit margin increased again, and the return on net assets achieved another good performance. The company’s gross profit growth in 2021 recorded 63.3% higher than the revenue growth, which proves that the gross profit increment of aluminum sector, strip and foil business is higher than the impact of aluminum price rise on revenue growth. In terms of cost splitting, benefiting from the scale effect, the proportion of labor cost, material cost and other factors in processing expenses continues to decrease, and the cost of improving quality and efficiency of the company is significant. In terms of roe, the company achieved 17.1% in 2021, with a year-on-year increase of 4.97pcts, mainly because the net interest rate increased from 6.7% to 7.7% and the equity multiplier increased from 1.42 to 1.71.
The same level of liquid assets and liquid liabilities has increased, driving the rationalization and recovery of financial leverage. In 2021, the company’s asset liability ratio rose from 29% to 42%. The increase in the liability ratio was mainly due to the simultaneous and significant increase of liquid assets and liquid liabilities from 4.432 billion yuan / 4.126 billion yuan to 12.771 billion yuan / 6.474 billion yuan, of which the increase in monetary assets, notes receivable, accounts and inventories was the main reason for the increase in liquid assets. Increase in notes and accounts receivable due to the increase in accounts receivable from foreign trade customers and the endorsement or discount of bank acceptance bills that are not due are still recognized as financial assets. It is expected that the subsequent occupation of current assets is expected to decrease. In addition, the increase of inventory turnover rate proves that the company’s working capital management is still being optimized.
The high prosperity of aluminum processing track continues & the first mover advantage of recycled aluminum “guaranteed utilization” consolidates the high growth trend of the company’s performance. After the supply side reform, the aluminum processing track has significant advantages in scale. Under the leading effect and the high-end trend of new demand, the track orders are inclined to the head companies, and the operating rate of the industry is obviously differentiated. At the same time, the company took the lead in laying out the “graded utilization” track and set up track barriers for China’s first large-scale production enterprises, upstream and downstream supply and demand matching and production equipment know-how process, which is expected to maintain the high profit of “graded utilization”.
Investment suggestion: we estimate that the net profit attributable to the parent company from 2022 to 2024 will be RMB 2.643 billion, RMB 3.419 billion and RMB 3.884 billion respectively, with corresponding PE of 10.5, 8.1 and 7.1 times and Pb of 2.1, 1.7 and 1.4 times respectively. As a leader in China’s aluminum processing industry, the company has built a core competitive advantage in operating costs. It has entered the field of intensive and deep processing through R & D drive and advanced equipment investment, realizing the docking of product production lines and high growth market space. The improvement of single ton processing fee and capacity utilization is expected to bring steady growth in performance. In addition, the company is a leading “guaranteed utilization” enterprise of recycled aluminum in China. With the support of the first in advantage, the company’s recycled aluminum business is expected to maintain a high profit level. Considering the company’s existing production line and management advantages, we expect the company to maintain a high growth rate in the future. From the horizontal comparison, the current valuation level is at the industry average, and the stronger performance growth expectation is expected to significantly reduce the company’s relative valuation level and maintain the “buy” rating.
Risk tips: raw material price fluctuation risk, market vicious competition risk, cash flow over expected fluctuation risk, etc.
