\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 399 Fushun Special Steel Co.Ltd(600399) )
Event: Fushun Special Steel Co.Ltd(600399) released the 2021 annual report, and achieved an operating revenue of 7.41 billion yuan in 2021, a year-on-year increase of + 18.2%; The net profit attributable to the parent company was 783 million yuan, a year-on-year increase of + 42%; Deduct the net profit not attributable to the parent company of RMB 685 million, a year-on-year increase of + 34.3%. In 2022, the company plans to achieve the output of “three high and one special” core products of 75000 to 85000 tons, the operating revenue of 8 to 8.8 billion yuan and the net profit of 500 to 800 million yuan.
The cost of raw materials and the gross profit margin have decreased: the cost of raw materials accounts for about 60-70% of the cost composition of the company’s products. The price of major raw materials such as nickel, cobalt and chromium fluctuates greatly, affecting the cost of the company. In 2021, the company’s overall gross profit margin was 20.1%, a year-on-year decrease of 1.9 percentage points. The company locks in the price of corresponding raw materials through the “production by sales” mode, and realizes economies of scale and reduces production costs through technological innovation, process optimization and capacity expansion.
Implement cost reduction and efficiency increase, and improve the level of net interest rate: the company’s sales, management, R & D and financial expense rates in 2021 were 0.8%, 2.6%, 4.2% and 1.2% respectively, with a year-on-year decrease of 0.01, 0.14, 2.32 and 0.1 percentage points respectively. The net interest rate was 10.6%, a year-on-year increase of 1.8 percentage points.
A number of technological improvements have expanded the production capacity of superalloys and high-strength steel to meet the strong demand in the field of national defense and military industry: in 2021, the company’s superalloy business achieved a sales revenue of 1.3 billion yuan, a year-on-year increase of + 12.4%, and the gross profit margin was 42.6%, a year-on-year increase of 2.2 percentage points; The superalloy business accounted for 17.6% of the company’s overall revenue and 37.3% of the company’s gross profit. With the rapid development of downstream aviation, aerospace and gas turbine fields, the market demand for raw materials such as superalloy and ultra-high strength steel continues to grow. The company actively arranges a number of production and technological transformation projects to expand production capacity. The 30 ton vacuum induction furnace is planned to be hot tested in November 2022, and the 30 ton vacuum consumable furnace is planned to be put into operation in October 2022. The technical transformation projects of superalloy and high-strength steel industry are expected to be put into production in the second half of 2022. As the projects are completed and put into operation, the company’s product supply capacity will be further improved, and the increase in the proportion of high-temperature alloy high value-added products will drive the improvement of the company’s overall performance.
22 year target revenue of RMB 8-8.8 billion: in 2022, the company plans to achieve steel output of 680000 tons to 740000 tons and steel output of 540000 tons to Shanghai Pudong Development Bank Co.Ltd(600000) tons, including 75000 tons to 85000 tons of “three high and one special” core products; The company achieved an operating revenue of 8 billion yuan to 8.8 billion yuan and a net profit of 500 million yuan to 800 million yuan. With the release of production capacity and the rise in the prices of raw materials and energy and power, the company’s revenue plan is significantly higher than that of 6.5-7 billion yuan in 2021.
Investment suggestion: it is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 9.9/12.5/1.61 billion respectively, and the current share price corresponds to 30 / 24 / 18 times of PE. The company actively arranged technological transformation and expanded production capacity. The superalloy business is expected to become an important growth point of performance in the future and maintain the “overweight” rating.
Risk warning: the risk that the epidemic will affect the macroeconomic environment and the downstream growth rate is lower than expected; The risk that the price of raw materials fluctuates sharply and the transmission is less than expected; The risk of intensified industry competition.
