Luyang Energy-Saving Materials Co.Ltd(002088)
Event:
The company released its annual report for 2021, and achieved an operating revenue of 3.164 billion yuan, an increase of 36.04% at the same time; The net profit attributable to the parent company was 534 million yuan, an increase of 44.27% at the same time; Deduct the net profit not attributable to the parent company of 522 million yuan, an increase of 48.55% at the same time. In the fourth quarter alone, the company achieved a revenue of 878 million yuan, an increase of 7.51% at the same time; The net profit attributable to the parent company was 130 million yuan, with a decrease of 12.36%; Deduct the net profit not attributable to the parent company of 129 million yuan, with a decrease of 1.80%. The company announced the profit distribution plan for 2021, and distributed a cash dividend of 7 yuan (including tax) for every 10 shares, with a cash dividend ratio of 66%, corresponding to the current dividend rate of 5% +.
Comments:
The industry demand is improving, and the superposition of marketing system reform drives the rapid growth of sales:
During the reporting period, the total sales volume of the company’s products reached 594000 tons, an increase of 47% at the same time; Among them, the sales of ceramic fiber cotton, blanket and components, ceramic fiber wet products, light mullite bricks and castables, and basalt fiber were 381000 tons, 42000 tons, 29000 tons and 143000 tons respectively, with an increase of 56%, 58%, 47% and 25% respectively. During the reporting period, the average price of ceramic fiber products was 6005 yuan / ton, with a decrease of 11%; The average price of basalt fiber is about 3047 yuan / ton, with a decrease of 2%.
The high growth of ceramic fiber sales is mainly due to: 1) the optimization of competition pattern and the rapid and large-scale volume of thermal insulation products; 2) The demand is improving. With the improvement of enterprise owners’ awareness of the “double carbon” policy, the willingness to adopt high-efficiency and energy-saving thermal insulation materials in the process of energy-saving transformation has increased significantly; 3) The company’s marketing system has been reformed, and the share in the field of thermal insulation materials has been increased by relying on the company’s leading cost advantage; In the field of high-end functional refractories, the company has built a professional marketing team and adopted customized marketing and services according to the needs of different modules in different industries, so as to broaden the application of downstream customers and industries. The slight decrease in the average price of ceramic fiber is mainly due to the change of product structure. The sales volume of thermal insulation materials increased rapidly in 2021, and the average price of thermal insulation materials is much lower than that of refractory materials.
We judge that with the accelerated promotion of the company’s refractory products, the proportion of high-end products will rise to a certain extent; The competition of thermal insulation materials is relatively fierce, and the profitability fluctuates at the current level.
To maintain a high profit structure and benefit from long-term competitiveness:
During the reporting period, the company’s comprehensive gross profit margin was 34.7%, with a decrease of 1.5pct; Among them, the comprehensive gross profit margin of ceramic fiber is about 38.1%, with a decrease of 1.7 PCT; The comprehensive gross profit margin of basalt products is about 13.5%, with a decrease of 2.0pct. The decline of comprehensive gross profit margin mainly includes: 1) the rise of raw material and energy costs; 2) The change of product structure is caused by the large amount of thermal insulation ceramic fiber.
With the reform of the marketing system and the full release of the production capacity of thermal insulation products, the expense rate decreased significantly throughout the year, thus pushing up the net interest rate. During the reporting period, the company’s expense rate was 15.2%, with a decrease of 1.6pct. The sales expense rate is 6.3%, with a decrease of 0.9pct; The management fee rate is 8.7%, with a decrease of 0.8pct; The financial expense rate was 0.14%, with an increase of 0.1pct. The net profit margin on sales was 16.9%, with an increase of 1PCT.
Q4 business is under pressure in the short term and does not change the long-term trend. The gross profit margin of Q4 alone was 32.4%, down 2.3pct month on month, down 4.8pct compared with Q1. It is mainly affected by two factors: 1. 21q4, power supply shortage in Shandong, Inner Mongolia, Guizhou and other places, and the company’s capacity release is limited; 2. The cost of raw and fuel materials continued to rise in 2021. According to the company’s announcement, the purchase price of main raw and auxiliary materials increased by about 7% year-on-year; The purchase price of natural gas increased by about 18% year-on-year; The power purchase price of Shandong plant increased by about 5% year-on-year. In November 2021, the company has adjusted the selling price of some ceramic fiber products, with an increase of 5% – 20%. However, the product price increase requires transmission time, so it is not fully reflected in the operating results in the fourth quarter.
Cash flow is bright and capacity expansion does not rely on external financing:
In 2021, the net operating cash flow of the company was 530 million yuan, an increase of 17% at the same time; Cash to cash ratio: 0.91; The net cash ratio is 0.98. The impairment loss of assets was 1.33 million yuan, a year-on-year decrease of 990000 yuan, mostly the impairment loss of engineering materials; The credit impairment loss was 8.74 million yuan, a year-on-year decrease of 9.09 million yuan, mainly due to the bad debt loss of accounts receivable.
By the end of 2021, the company’s ceramic fiber production capacity had reached 480000 tons / year, an increase of 120000 tons over the previous year. It was mainly realized through the technical transformation of the production line, and the annual comprehensive capacity utilization rate reached more than 95%. The company continued to expand its scale after announcing a new 120000 ton ceramic fiber production capacity in Inner Mongolia. The project can expand the company’s production capacity by another 25%, but the total investment is 180 million yuan, accounting for only 34% of the net profit of this year.
Optimistic about the industry trend and the company’s own alpha, maintain the “buy” rating:
The general trend of energy conservation and carbon reduction in the industrial field; Energy prices are at a high level, and the economy of energy-saving transformation has been further strengthened. In February 2022, the national development and Reform Commission and four departments jointly issued the implementation guide for the transformation and upgrading of energy conservation and carbon reduction in key areas of high energy consuming industries (2022 version), which may promote the application of furnace and pipeline insulation materials, and recommend the use of ceramic fibers in some scenes.
The company has entered the production capacity expansion cycle. For the first time in many years, the company has built a new production capacity of ceramic fiber (previously, the production capacity growth depended on technological transformation). The 120000 ton production line in Inner Mongolia is under construction. The company is also focusing on developing and promoting its products and constantly cultivating the market. For example, we are not confined to the petrochemical field with traditional advantages, we are also increasing the layout in the steel, nonferrous metals and fire prevention markets, and strive to promote the development of emerging industries; We actively promoted the transformation from selling products to selling energy-saving and carbon reducing furnace lining system, achieved positive results in the promotion of typical structures, and the all fiber furnace lining of ethylene cracking furnace was widely praised by users.
The energy-saving transformation of high-energy consumption industry is the general trend, and the company’s technology and cost advantages are leading in the industry. Therefore, the logic of “market share improvement brought by the reform of supply side marketing system + energy conservation and carbon reduction trend to promote the expansion of market demand” will still be deduced. At the same time, we believe that the company is a scarce target with both value and growth in the market. The dividend proportion is high, and the production capacity is expanding continuously without relying on large capital investment. The characteristic of high dividend is expected to be favored by the current market. Considering that the epidemic has a certain impact on the product delivery of 22q1-q2 company, we slightly reduced the company’s 22-year EPS to 1.23 yuan (5.4% lower than the last time), maintained the 23-year EPS to 1.56 yuan, increased the 24-year EPS to 1.90 yuan, and maintained the “buy” rating.
Risk tip: the growth of industry demand is less than expected; The increase of the company’s market share is less than expected; The impact of the epidemic on the company’s delivery; New business expansion and new capacity construction are not as expected; The recovery of rock wool business was less than expected; The proportion of cash dividends decreased significantly.
