Guangdong Hongda ( Guangdong Hongda Blasting Co.Ltd(002683) )
Event: the company released its 2021 annual report. In 2021, the company achieved an operating revenue of 8.526 billion yuan, a year-on-year increase of 33.33%; The net profit attributable to the parent company was 480 million yuan, a year-on-year increase of 18.93%. Among them, the revenue of civil explosive sector was 1.869 billion yuan, a year-on-year increase of 43.97%; The mining service business segment achieved a revenue of 6.11 billion yuan, a year-on-year increase of 35.35%; The defense equipment sector achieved a revenue of 384 million yuan, a year-on-year decrease of 25.14%.
Comments:
The rising price of raw materials affects the profit level, and the continuous integration of the industry is a good leader: the price of ammonium nitrate, the main raw material of industrial explosives, rose sharply in 2021, with an increase of nearly 40% at the end of the year compared with the beginning of the year. The gross profit rate of the company’s products increased by 29.95% compared with 214.95% in 2020. Considering that the company has begun to adjust the sales price of civil explosive products, it is expected that the impact of the subsequent rise in the price of upstream raw materials on the profit level of the company’s civil explosive business is expected to be reduced. At present, the integration of civil explosive industry is the general trend. The leaders of the Ministry of industry and information technology pointed out at the national video conference on safety management of civil explosive industry that the industry should continue to strengthen restructuring and integration during the 14th Five Year Plan period. At the end of the 21st century, the company’s licensed production capacity was 466000 tons, ranking the second in China. By actively focusing on the industrial layout of the North rich ore belt, the company is expected to further consolidate its advantageous position in the future.
The orders of traditional defense business have decreased, and the business in the international market has made steady progress: the revenue of the company’s defense equipment sector has decreased year-on-year in 21 years, mainly due to the decrease in the orders of traditional defense equipment products and individual equipment products. The company continues to increase investment in scientific research and steadily promote business in the international market; Start the construction project of general assembly plant; Participated in the establishment of Guangdong Military Industry Group Co., Ltd., which is expected to have a positive impact on the company in terms of technology, market and capital in the future. Due to the epidemic prevention and control, the foreign trade progress of some products was slower than expected, which greatly affected the development of defense equipment business. With Russia’s special military action against Ukraine, the uncertainty of world security has increased significantly. China’s weapons and equipment have the possibility to expand its share in the international military trade market with better cost performance advantages. The company’s international market business is expected to usher in good opportunities.
Profit forecast, valuation and rating: the net profit attributable to the parent company in 2021 is slightly lower than our previous forecast of 506 million yuan, about 5%. Considering the intensified competition in the market of the company’s traditional defense business, the company slightly lowered its profit forecast of 4.34% / 2.54% from 2022 to 2023 to 580 million yuan / 688 million yuan, and predicted a profit of 805 million yuan in 2024. The EPS of 2022 to 2024 were 0.77, 0.92 and 1.08 yuan respectively. The corresponding PE of the current stock price was 33x, 28x and 24x respectively. At present, the company is in a leading position in the field of civil explosives in China. With the integration of the industry, it is expected to further consolidate its advantages and enhance its profitability; The steady progress of military trade business and the company’s plan to expand China’s defense business are expected to add a new driving force to the company’s performance growth; Maintain the “overweight” rating.
Risk tip: the risk of slowdown caused by intensified competition in defense equipment business; Risks in safe production of mining clothing and civil explosion; Risk of price rise of civil explosive equipment and raw materials; The risk that the market development of military trade business is not as good as expected.
