\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 010 Inner Mongolia Baotou Steel Union Co.Ltd(600010) )
Event overview: on April 14, the company released its 2021 annual report: in 2021, the company achieved a revenue of 86.183 billion yuan, a year-on-year increase of 45.42%; The net profit attributable to the parent company was 2.866 billion yuan, a year-on-year increase of 606.09%; The net profit deducted from non parent company was 2.861 billion yuan, with a year-on-year increase of 520.54%. In terms of quarters, in 2021q4, the company achieved a revenue of 22.187 billion yuan, a year-on-year increase of 39.73%; The net profit attributable to the parent company was -911 million yuan, a year-on-year decrease of 481.70%; Net profit deducted from non parent company was -939 million yuan, a year-on-year decrease of 476.05%.
Comments: the output of steel and rare earth increased simultaneously, and the gross profit margin increased by 1.51pct
① output: in 2021, the output of steel will increase by 5.36%, and the output of rare earth concentrate will increase by 42.00%. The company produced 16447300 tons of steel in the whole year, with a year-on-year increase of 5.36%; The production of rare earth concentrate was 170400 tons, with a year-on-year increase of 42%; The production of fluorite is 100500 tons.
② price: the company’s cost control per ton of steel is excellent, and the benchmark price of rare earth concentrate continues to rise. In 2021, the price of raw materials rose, the company’s self-produced ore increased by more than 8.5 million tons for the first time, improved energy efficiency and reduced costs. It is estimated that the actual cost per ton of steel increased by only 31.55%, while the price of steel increased by about 33.28%. In addition, the benchmark price of concentrate agreed by the company and China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) increased by 29.12% year-on-year, and the overall gross profit margin of the company increased by 1.51pct to 11.18% in 2021.
③ the decline of gross profit and impairment loss dragged down the performance of 2021q4. On a month on month basis, affected by the weak demand for real estate, the steel price began to callback, while the raw material price was relatively stable, resulting in the company’s gross profit margin falling by 9.96 PCT to 1.27% month on month, and the gross profit fell by 2.477 billion yuan. In addition, impairment loss (- 289 million yuan), other / investment income (- 97 million yuan) and non operating income and expenditure (- 66 million yuan) jointly dragged down the performance of 2021q4.
Core focus in the future: the rare earth business has a promising prospect and strong guarantee of steel raw materials
① rare earth oxide reserves are abundant, and the price of rare earth concentrate is expected to continue to rise. Bayan Obo mine owned by Baotou Iron and Steel Group, the controlling shareholder of the company, has proved 35 million tons of rare earth folded oxide reserves. The rare earth folded oxide reserves of tailings pond owned by the company are about 13.82 million tons, and the production capacity of rare earth concentrate is 450000 tons. The trading volume of the latest agreement between the company and China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) has increased, while the benchmark price is still 52% of the market price after the increase. At present, the downstream demand of rare earth sector is strong, and the supply and demand maintain a tight balance. It is expected that the price of rare earth concentrate of the company is still expected to continue to rise.
② it has four high-quality production lines of “board, pipe, rail and line”, with outstanding advantages in raw material guarantee. The company’s steel production capacity is 17.5 million tons, and has formed a production pattern of four high-quality lines of “sector, pipe, rail and line”. Secondly, the company’s iron and steel raw materials are highly guaranteed. In 2021, the self-produced mine increased by more than 8.5 million tons for the first time, realizing a historical leap. In addition, the company has a coke production capacity of 8 million tons to provide guarantee for blast furnace raw materials.
Profit forecast and investment suggestions: the downstream demand of rare earth sector is strong, and the market scale of the industry will continue to expand. We think the prospect of the company’s rare earth business is promising; At the same time, under the background of “double carbon”, the profitability of steel business is expected to continue to improve. We expect that the net profit attributable to the parent company from 2022 to 2024 will be RMB 4.089/53.14/6.434 billion, and the PE corresponding to the closing price on April 15 will be 25X, 19x and 16x, maintaining the “recommended” rating.
Risk tip: the price of raw materials is rising, the downstream demand is less than expected, the covid-19 epidemic continues to affect, and the production expansion of overseas rare earth mines is too fast.
