\u3000\u3 Shengda Resources Co.Ltd(000603) 916 Sobute New Materials Co.Ltd(603916) )
Event overview. The company released its annual report for 2021. In 2021, the company achieved a revenue of 4.52 billion yuan, a year-on-year increase of + 23.81%, and a net profit attributable to the parent company of 533 million yuan, a year-on-year increase of + 20.88%; The corresponding Q4 revenue was 1.29 billion yuan, a year-on-year increase of + 7.3%, and the net profit attributable to the parent company was 166 million yuan, a year-on-year increase of + 19.8%.
Q4 demand and cost are under pressure, and the price of admixture products increases driven by cost. The company’s performance basically meets expectations. In 2021q4, due to the impact of energy consumption control and tight real estate capital chain, the demand for civil construction and related admixtures is relatively weak. At the same time, according to wind data, the price of ethylene oxide in 2021q4 once increased from 7500 yuan / ton in Q3 to about 10000 yuan / ton, putting pressure on the company’s annual cost. According to the business data announced by the company, the sales volume of admixtures of 2021q4 company is about 520000 tons, with a year-on-year increase of – 2.6%, of which the sales volume of high-performance water reducing agent is 390000 tons, with a year-on-year increase of + 6.4%, and the sales volume of functional materials is 90000 tons, with a year-on-year increase of – 12.6%. Due to the rising cost, the company raised the price in Q4, and the price of high-performance water reducer increased by about 200 yuan / ton to 2183 yuan / ton. Throughout the year, due to the production of the company’s British base, the expansion of production capacity and the improvement of the concentration of the industry itself, the comprehensive sales volume of the company’s admixture still increased by 27.3% to 1.88 million tons year-on-year. However, due to weak market demand and fierce competition, the company’s selling price decreased by 5.3% to 2086 yuan / ton year-on-year. At the same time, the cost of raw materials increased and the gross profit margin decreased, which is the main reason why the growth rate of the company’s performance is lower than that of. It is estimated that the annual net profit contributed by the admixture business is about 450 million yuan, with a year-on-year decrease of about 16 yuan / ton.
Significant results in cost reduction and efficiency increase, and help highlight toughness at dark times. In 2021, the company went further in digital operation, completed the upgrading of procurement SRM system, HR system, smart workshop and other projects, and further reduced the cost. According to the data of the annual report, we estimate that the unit manufacturing cost of the company’s admixture (including all non raw material expenses) decreased by 49 yuan / ton year-on-year in 2021, so that the overall cost of the admixture business only increased by 15 yuan / ton year-on-year (1.1%) when the raw material cost increased significantly. In addition, the company’s sales expense rate and management expense rate decreased by 1.0/0.4 percentage points year-on-year, and the operation efficiency continued to improve. The decline of expense ratio effectively hedged the rise of raw material costs, making the company still achieve a profit growth rate of more than 20% in the darkest hour of 2021.
New materials and testing business performed well.
Substantial growth in sales of functional materials: the functional materials business, which can better represent the sales of special additives, sold 320000 tons in 2021, with a year-on-year increase of + 37.3%, the highest among the additives sub sectors, reflecting the company’s R & D strength of additives, gaining industry recognition and gradually broadening the application scene.
Start of new material business: in 2021, the company completed the acquisition of Jiangsu Daocheng and entered the stainless steel pipe business. The main application scenarios of the company’s stainless steel pipe business are hospitals and other municipal fields, which have good synergy with the company’s admixture business. Under the collaborative sales, the company’s stainless steel pipe business revenue will be 126 million yuan in 2021, and the expansion of non admixture materials will set sail.
Steady growth of testing business: in 2021, the company’s testing business revenue was 615 million yuan, a year-on-year increase of + 17.8%, achieving a net profit of 140 million yuan and an estimated consolidated net profit of 80-85 million yuan, exceeding the goal of the incentive plan.
The cost pressure is expected to be limited in 2022, accelerating the move towards a comprehensive material platform. Although there is short-term pressure on the company’s delivery and performance in 2022q1 due to the impact of epidemic control in key cities, the marginal demand of the industry is expected to improve in the whole year under the background of real estate correction and infrastructure acceleration. In addition, the company’s annual report disclosed that Jiangmen base is expected to be put into operation in 2022, the company’s capacity expansion continues, and the determination of sales growth is still strong. In addition, at present, the price of ethylene oxide remains at about 8200 yuan / ton, which is significantly lower than the high point of 2021q4. In 2022h2, the Federal Reserve raises interest rates or further increases the pressure on commodity prices. It is judged that the cost pressure of the whole year is generally limited. In 2021, the company announced to invest in the construction of flexible waterproof projects to further enrich the company’s product structure. It is judged that in 2022, the company will still accelerate to become a comprehensive platform material enterprise.
Investment advice
Considering the great impact of epidemic control from February to April, the sales volume assumption is reduced, but the cost assumption is also reduced. The revenue forecast for 2022 / 2023 is lowered to 5.44/6.69 billion yuan (Original: 5.997/7.366 billion yuan), the EPS forecast is lowered to 1.58/2.04 yuan (Original: 1.76/2.30 yuan), the new revenue forecast for 2024 is 8.26 billion yuan, the EPS forecast is 2.61 yuan, and the profit forecast for 20222024 corresponds to 23.73 yuan on April 15, with a closing price of 15.02/11.62/9.10xpe. The 20x valuation remained unchanged. As the valuation was transferred to 2022, the target price was increased to 31.60 yuan (Original: 27.40 yuan). Considering the gradual improvement of the company’s national layout, the cost reduction effect was significant, and the gradual layout of new material business, the “buy” rating was maintained.
Risk tips
The demand is lower than expected, the cost is higher than expected, and there are systemic risks.
