\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 399 Fushun Special Steel Co.Ltd(600399) )
Event: the company announced on March 31 that in 2021, the operating revenue was 7.414 billion yuan (+ 18.21%), the net profit attributable to the parent company was 783 million yuan (+ 42.02%), the gross profit margin was 20.01% (- 1.98pcts), and the net profit margin was 10.57% (+ 1.78pcts). In 2021q4, the operating revenue was 1.846 billion yuan (+ 18.46%), and the net profit attributable to the parent company was 98 million yuan (- 33.22%).
Key investment points:
“Three high and one special” products continued to develop, and the annual performance increased rapidly; At the same time, due to the rise of raw materials and the impact of limited production and films, the cost side of 21q4 was under pressure. In 2021, the company’s operating revenue was 7.414 billion yuan (+ 18.21%), the net profit attributable to the parent company was 783 million yuan (+ 42.02%), and the net profit deducted from the net profit not attributable to the parent company was 685 million yuan (+ 34.33%), which increased significantly. The gross profit margin is 20.01% (- 1.98 PCTs) and the net profit margin is 10.57% (+ 1.78 PCTs). Due to the rise of raw materials and the pressure on the cost side, the gross profit margin decreased slightly; With the increase of the company’s business scale, the rate decreased and the net interest rate increased slightly. In Q4 of 2021, the company’s operating revenue was 1.846 billion yuan (+ 18.46%), but at the same time, the operating cost increased rapidly, with a gross profit margin of 15.45%, a year-on-year increase of -13.72pcts; Thus, the net interest rate fell to a certain extent, to 5.32%, year-on-year -4.13pcts. During the reporting period, the company achieved steel output of 691500 tons (+ 7.76%), and steel output of 550600 tons (+ 9.12%).
Superalloy is the most profitable business of the company, with revenue accounting for 17.59% and gross profit accounting for 37.32%; The output is 5900 tons and the sales volume is 60000 tons, which is basically balanced. In addition, the selling prices of the company’s main products have increased to varying degrees, but due to the rise of raw materials and other factors, except for superalloys, the gross profit margin still fell to a certain extent.
In 2021, the company’s three fee expense rate was 4.63% (-0.25pcts), and the sales expense rate was 0.85%, which was basically the same as last year; The management fee rate was 2.59% (- 0.14 PCTs) and the financial fee rate was 1.18% (- 0.10 PCTs), which decreased slightly. The R & D expense rate was 4.17% (-2.32 PCTs). The inventory was 2.187 billion yuan (+ 37.92%), with a rapid growth, mainly due to the rise of large raw materials; At the same time, orders for high-end products increased, and the storage of raw materials and finished products increased. Contract liabilities amounted to 321 million yuan (+ 33.33%). The project under construction of the company is 485 million yuan (+ 149430%), and the company has steadily promoted the technical transformation project, with a large increase in investment.
Comprehensively improve production and efficiency, and promote capacity expansion
The reporting period is a key year for the company to comprehensively increase production and efficiency. The company has made some progress in improving production efficiency, improving indicators, improving yield and reducing cost and increasing efficiency. At the same time, the company actively invested in the development and innovation of key products. During the reporting period, the company focused on the development of medium and high-end product market and paid close attention to the rapid development of military industry; Expand new products and markets, develop 253 new varieties and 148 new users, and promote 16 domestic alternative imports and 66 product certification projects.
The sharp rise in raw material prices may put pressure on the company’s short-term profitability, and there may still be a capacity bottleneck in 2022
The price of the company’s main raw materials such as nickel, cobalt and chromium fluctuated greatly, and the cost of raw materials accounted for about 60% – 70% of the company’s product composition. In 2021, due to the sharp rise of nickel price, the company’s performance was affected to a certain extent; Meanwhile, the prices of some commodities including nickel rose sharply in 2022, reaching a record high, causing uncertainty to the profitability of the company. Although the company adopts the marketing mode of setting production according to sales and locks the price after the order is confirmed, it can not completely transfer the rising cost of raw material prices to the downstream. In addition, the company’s current medium and high-end products, such as superalloys, have a certain capacity bottleneck. The capacity implementation of technical transformation projects is expected to be in the second half of 2022. It is expected that the limited capacity will still have a certain impact on the company’s growth. Combined with the current raw material prices and energy and power prices, 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 in 2022, 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.
Investment suggestions:
1. In 2021, the company’s operating revenue was 7.414 billion yuan (+ 18.21%), the net profit attributable to the parent company was 783 million yuan (+ 42.02%), and the net profit attributable to the parent company was 783 million yuan (+ 42.02%); The gross profit margin is 20.01% (- 1.98 PCTs) and the net profit margin is 10.57% (+ 1.78 PCTs). Due to the rise of raw materials and the pressure on the cost side, the gross profit margin decreased slightly; With the increase of the company’s business scale, the rate decreased and the net interest rate increased slightly. Superalloys are mainly used in aerospace and are the most profitable business of the company, with revenue accounting for 17.59% and gross profit accounting for 37.32%.
\u3000\u30002. The sharp rise of the company’s overall raw material prices may put pressure on the company’s short-term profitability, and there may still be a capacity bottleneck in 2022. At the same time, the company actively promotes production capacity construction. In the capacity expansion project, the engineering construction project of homogeneous high-strength large-size superalloy and ultra-high strength steel and the technical transformation project of the new 70MN fast forging machine in the forging plant will be put into operation around October 2022 and hot test in May 2022 respectively. Both are expected to increase the capacity by 40000 tons. The high-temperature alloy and high-strength steel industrialization technology transformation project (phase 1) and the new 22MN precision forging machine production line and auxiliary facilities of the forging plant will be put into production in the second half of 2022 and the first half of 2024 respectively. Both are expected to increase the production capacity by 44000 tons. The new high alloy small bar production line and ancillary facilities of Shilin company are expected to be completed by the end of 2023, which can increase the production capacity by 40000 tons. The company also disclosed the new production expansion plan, with an estimated investment of 1.076 billion yuan, which is mainly used for the capacity-building of superalloy and ultra-high strength steel, and the construction period is 20222023.
Based on the above point of view, we estimate that the company’s operating revenue from 2022 to 2024 will be 8.259 billion yuan, 9.503 billion yuan and 10.348 billion yuan respectively, the net profit attributable to the parent company will be 700 million yuan, 1.019 billion yuan and 1.199 billion yuan respectively, and the EPS will be 0.36 yuan, 0.52 yuan and 0.61 yuan respectively. We give a buy rating with a target price of 25 yuan, corresponding to 69, 48 and 41 PE from 2022 to 2024.
Risk tip: the promotion of capacity construction is not as expected; Price fluctuation risk of raw materials; Energy price fluctuation risk, etc.
