\u3000\u3 China Vanke Co.Ltd(000002) 541 Anhui Honglu Steel Construction(Group) Co.Ltd(002541) )
Investment summary:
The annual performance is in line with our expectations: the company’s operating revenue in 2021 was 19.515 billion yuan, a year-on-year increase of 45.08%, and the net profit attributable to the parent company was 1.15 billion yuan, a year-on-year increase of 43.93%; Deduct non net profit of 857 million yuan, with a year-on-year increase of 41.04%. The company achieved an annual output of 3.3867 million tons, and the annual average capacity utilization rate exceeded 90% to 91.53%. In 2021q4, the single quarter revenue was 6.137 billion yuan, a year-on-year increase of 55.7%; Q4 achieved a net profit attributable to the parent company of 326 million yuan in a single quarter, with a year-on-year increase of 9.8%, mainly due to the reversal of credit impairment of more than 100 million yuan in the same period last year. Excluding this factor, the profit growth rate is still high. The growth of raw material reserves in the growth period has dragged down the operating cash flow in stages: the operating net cash flow in 2021 was – 202 million yuan, slightly lower than our expectation. Mainly due to the company’s business expansion and the rise of steel costs, the company increased the strategic reserve of raw materials, the net increase of inventory in the whole year was 1.757 billion yuan, and the operating cash expenditure was large. The cash receiving end of the company is still relatively good, with a cash receiving ratio of 0.98. We expect that after the price rise period of raw materials, the company’s operating cash flow is expected to match the net profit again.
The production capacity will increase steadily to 5 million tons, and the scale advantage will continue to deepen. By the end of 2021, the company has a production capacity of 4.2 million tons and is expected to reach 5 million tons by the end of 2022, far ahead of the second echelon in the industry. The unit profitability continued to improve, and the growth trend of roe remained unchanged: the net profit per ton reached 339.6 yuan / ton, and the net profit deducted from non net profit per ton was 253.12 yuan / ton, both reaching a new high. The weighted average return on net assets increased to 17.55%, an increase of 2.54 PCTs at the same time, with a cumulative increase of 12.22 PCTs in five years. After the reshaping of the business model, the return continued to improve. The cost side fluctuated slightly, with a total increase of 27.66 yuan in labor, depreciation and period expenses per ton: the company’s labor cost per ton was 465.41 yuan (with an increase of 13.87 yuan) and the depreciation cost per ton was 96.46 yuan (with a decrease of 8.6 yuan); The cost per ton is 345.34 yuan (increased by 22.39 yuan), including 46.1 yuan per ton of sales cost (increased by 5.86 yuan), 82.05 yuan per ton of management cost (decreased by 6.85 yuan), 172.13 yuan per ton of R & D cost (increased by 18.74 yuan), and 45.06 yuan per ton of financial cost (increased by 4.64 yuan).
The company has signed a strategic cooperation agreement with the steel plant, and the advantages of the purchasing end will be further improved: the company has established a strategic partnership with large steel plants. With the company’s relatively stable and continuous steel procurement demand, it will increase procurement when the demand of the steel industry is weak, assist the steel plant to achieve orderly production, and the barriers at the purchasing end are expected to be further deepened. Under the background of steady growth, fixed asset investment is resilient, the concentration of steel structure industry is still low, and Honglu has no room for growth. Stable investment is an important main line of economic growth. From January to February 2022, the growth rate of fixed asset investment in manufacturing industry was 20.9%. The demand of steel structure industry may maintain a high boom. The company has significant growth and is expected to continue to benefit.
Investment suggestion: we are optimistic about the continuous improvement of the company’s output and the continuous improvement of unit profitability. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 1.466 billion yuan, 1.85 billion yuan and 2.1 billion yuan respectively, corresponding to EPS of 2.76 yuan, 3.49 yuan and 3.96 yuan, maintain the target price of 58 yuan and continue to give the “buy” rating.
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.
