\u3000\u3 Guocheng Mining Co.Ltd(000688) 087 Shandong Intco Recycling Resources Co.Ltd(688087) )
Key investment points
Event: the company released its annual report for 2021, realizing a revenue of 1.99 billion yuan, an increase of 17.14% at the same time; The net profit attributable to the parent company was 240 million yuan, an increase of 10.35% at the same time. Deduct non RMB 224 million, an increase of 79.11% at the same time, which is in line with our expectations.
The revenue contribution of plastic products exceeded 80%, and the volume and price of product expansion increased. After excluding the disposable protective mask and eye mask in 2020, the main business income increased by 32.66% at the same time. The high increase in income is mainly due to the simultaneous increase in volume and price of each section business by expanding market share and raising product price. The income contribution of plastic products exceeded 80%, of which the income of finished frames was 1.121 billion yuan, an increase of 25.90% and the income of lines was 462 million yuan, an increase of 34.71%. In 2021, the company actively developed new products such as 3D grille panels and embossed wallboards, increased the laying of decoration building materials and home decoration channels, strengthened the development frequency of overseas retail stores, live broadcasting and cross-border marketing, so as to enhance customer stickiness and improve customer unit value and market share.
Cost control & product structure adjustment and real profitability enhancement. Consider restoring ① the accounting method of transportation cost in 2021 is changed from sales expense to operating cost; ② Excluding the contribution of disposable protective mask and eye mask business in 2020, we calculate that the comprehensive gross profit margin will rise by 3.94 PCT to 29.96% in 2021. Among them, the gross profit margin of finished frames increased by 5.9pct to 31.7%; The line gross profit margin increased by 2.6pct to 32.91% simultaneously; The gross profit margin of particles increased by 2.61 PCT to 19.41%. We believe that it is related to the company’s continuous strengthening of cost control, continuous introduction of new series of products, realization of favorable price and adjustment of product sales structure.
The negative impact of the epidemic slowed down the progress of projects under construction. Due to the negative impact of covid-19 epidemic, the progress of equipment installation and commissioning of overseas projects is slow, and the progress of raised investment projects is also delayed. The latest progress of the company’s proposed projects under construction: 1) Malaysia 50000 T / a pet project: the module commissioning is completed as planned, and some products are receiving orders and selling in succession; 2) Vietnam Yingke PS deep processing project: successively carry out plant infrastructure, equipment commissioning, personnel recruitment and other work. 3) 100000 t / a multi category recycled plastics project: it is planned to spend 200 million yuan to purchase the new production capacity of Malaysian land reserve, and it is planned to add 100000 t / a PET / PP / PE multi category recycled plastics project. 4) China’s high-end iron products project with an annual output of 1 million pieces: the project is expected to start in May and be constructed and put into operation in October. 5) The use date of the raised investment-1150 sets / year recycling equipment project is proposed to be extended to December 2023. After the overseas and Chinese projects are put into operation, it will help the company expand the new product market, seize the first mover advantage and further expand the profit scale.
Expand categories vertically and horizontally, and have obtained GRS, FDA and other qualifications. The company plans to vertically expand the recycling field of PE, PP, HDPE and other multi variety plastics based on the advantageous field of PS / PET, and horizontally expand to the field of multi material resource regeneration. The company has obtained the global recycling standard (GRS), the U.S. Food and Drug Administration (FDA) and other qualification certification. The category expansion and gradual implementation of qualification will help the company enrich the product category, realize the coordination of incoming materials, improve the layout of recycled plastics, expand the business scope and open up long-term growth space.
Profit forecast and investment rating: the company is a pioneer in recycled plastics, and the project is steadily advancing, which is expected to contribute to the growth. Considering the repeated covid-19 epidemic, large fluctuations in the macro environment, rising raw material prices and other impacts, we lowered the company’s net profit attributable to the parent company from 390 / 590 million yuan to 301 / 379 million yuan in 20222023. It is expected that the net profit attributable to the parent company in 2024 will be 462 million yuan, corresponding to 26 / 21 / 17 times PE, maintaining the “buy” rating.
Risk warning: the project is not put into operation as expected, and there are risks of trade policy changes and tariff increases.
