\u3000\u3 Shengda Resources Co.Ltd(000603) 985 Jiangyin Hengrun Heavy Industries Co.Ltd(603985) )
Event: the company disclosed in the annual report of 2021 that the annual revenue was 2.293 billion, yoy-3.82%, the net profit attributable to the parent was 442 million, yoy-4.59%, and the net profit not attributable to the parent was 276 million yuan, yoy-31.43%; Q4 achieved a revenue of 563 million, yoy-20.57%, and a net profit attributable to the parent company of 105 million, yoy-31.73%, deducting a net profit not attributable to the parent company of – 57 million, yoy-159.5%.
Affected by the slowdown of sea breeze orders, fierce land bidding and the upward rise of overseas transportation costs, Q4 performance and profitability were lower than expected. The company’s Q4 revenue and profit fell significantly year-on-year: 1) Q4 wind farm owners were cautious about the commencement of wind power projects, the release of orders slowed down, and the orders of offshore wind power projects decreased, resulting in the production and sales volume of wind power tower flanges of the company in the whole year falling short of expectations; 2) Q4 gross profit margin fell to 9.7%, down 14.61pct year-on-year, mainly due to the impact of subsidized wind power projects on the Internet at parity, the demand for onshore wind power projects fell, the bidding price competition was fierce, and the wind turbine price fell into the situation of low price competition; 3) The severe epidemic situation abroad and the sharp rise in international shipping costs have affected the company’s export business to a certain extent; 4) China’s raw material prices rose. From the perspective of the whole year, in 2021, the revenue of rolled ring forgings was yoy-16.1%, the sales volume was 75000 tons, yoy-8.5%, the average price was 17000 yuan / ton, yoy-8.3%, while the year-on-year decline of single ton cost was only 2.4%, slower than the decline of unit price. Among them, the year-on-year decline of single ton raw materials, auxiliary materials, direct labor and manufacturing expenses were – 3.7%, 13.6%, 19.0% and – 11.9% respectively. The decline of raw materials was slower than the decline of unit price or related to the low price bidding of the industry, The rise of single ton of auxiliary materials may be related to material planning, and the rise of single ton of labor may be related to the low base caused by social security relief in 2020.
The production capacity is ready, waiting for the bidding volume of sea breeze. The company is one of the first batch of manufacturers in China to provide tower flanges for high-power wind turbines of offshore wind power. At present, it is one of the few enterprises in the world that can manufacture 7.0mw and above Shanghai wind power tower flanges. By the end of 2021, the capital construction of the company’s “capacity expansion project of large precision machined forgings for 50000 ton / year 12MW offshore wind turbine units” has been basically completed and will soon enter the trial production stage. At present, the pattern of offshore flange link is stable. From the perspective of the volume of single units in the recent offshore wind bidding, most of them are 10MW or even larger, and the flange pattern is more stable. The company’s 12MW wind power flange is put into operation, which is conducive to locking the company’s leading position in the future offshore wind market. Since 2022, the bidding volume has been 2.2gw. At present, the bidding scale is relatively small. We expect that the annual offshore wind bidding volume will be around 10GW in 2022, and the company’s fundamentals will improve with the increase of offshore wind bidding. In addition, the company’s “annual output of 4000 sets of large-scale wind power bearing production line project” has entered the construction stage and is expected to be put into trial production in June 2022; As a component with low localization rate in the field of wind power parts, the overall profitability of the bearing is good. The company has certain advantages by cutting into the bearing from ring forgings. The full cooperation with the host enterprise will speed up the mass production of the company’s products. At home and abroad, the company’s “deep processing project of gear with an annual output of 100000 tons” is still in the preparatory stage. In the future, gearbox forgings are also the focus of the company. The company itself has the production capacity of gearbox flange and has advantages.
Investment suggestion: considering the development of various businesses of the company, it is estimated that the net profit attributable to the parent company in 20222024 will be RMB 510 / 660 / 770 million respectively, and the corresponding PE will be 17x / 13X / 11x respectively. Considering the good development trend of Haifeng industry in the future and the competitive advantage of the company itself, maintain the “recommendation” rating.
Risk tip: the risk that the epidemic situation will affect the delivery speed, and the risk that raw materials will continue to rise, resulting in the decline of gross profit margin.
