\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 456 Baoji Titanium Industry Co.Ltd(600456) )
Event: the company announced on April 16 that in 2021, the revenue was 5.246 billion yuan (+ 20.94%), the net profit attributable to the parent was 560 million yuan (+ 54.49%), the gross profit margin was 23.27% (-0.99pcts), and the net profit margin was 11.91% (+ 2.66pcts).
Key investment points:
Synonymous with "China Titanium", titanium supplier of major aerospace projects: the company is the largest titanium and titanium alloy production and scientific research base in China, and the annual output of titanium materials, the leading product, ranks among the top of similar enterprises in the world. The company's military products are widely used in aviation (engine blades, protective sectors, ribs, wings, landing gear, etc.), aerospace (cabin framework, rocket engine shell parts, body fuel engine combustion cabin, butt joint parts, engine boom, etc.), ships (hydrofoil and marching gear on ships, etc.), and civil products are mainly used in chemical and metallurgical industries. The company has been an excellent supplier of China Aerospace Hi-Tech Holding Group Co.Ltd(000901) group for three consecutive times. It is also a strategic partner of Boeing, Airbus, SNECMA, Goodrich, Bombardier and Rolls Royce.
Benefiting from the demand for titanium products, the company's performance reached a new high: in 2021, the company's revenue increased by 20.94% year-on-year, the net profit attributable to the parent company increased by 54.49%, and the gross profit margin (23.27%, - 0.99pcts) decreased. We believe that it is mainly due to the rise in the price of raw material sponge titanium in the second half of 2021. However, under the environment of increasing demand for high-end titanium materials led by the aerospace field, the company's revenue and performance reached a new high, Since 2018, the compound growth rate of the company's net profit has been 58.36%. In terms of business segments, the revenue of titanium products was 4.743 billion yuan (+ 27.75%), and the gross profit margin was 23.38% (- 2.52 PCTs); The revenue of other metal products was 342 million yuan (- 34.33%), and the gross profit margin was 19.37% (+ 7.47 PCTs). In 2021, the output of titanium products of the company was 27800 tons (+ 47.96%), and the sales volume was 26600 tons (+ 41.46%), both of which increased rapidly.
2022q1 performance made a good start: the company announced the 2022q1 performance forecast, which is expected to realize the net profit attributable to the parent company of 180205 million yuan, with a year-on-year increase of 87.00% to 112.97%. The main reason is that the company actively grasped the market opportunities of titanium industry, fully expanded market demand, continuously improved operation quality and efficiency, and enhanced product profitability.
Focus on strengthening cost control and effectively reducing operating costs: in 2021, the company's three rate (6.37%, - 2.67 PCTs) decreased rapidly, and the enterprise's production management efficiency improved significantly. When the gross profit margin decreased, the net profit margin (11.91%, + 2.66 PCTs) increased significantly. In terms of specific expenses, the management expenses were 199million yuan (-14.07%), mainly due to the adjustment of the company's social security distribution according to department changes; The sales expense was 49 million yuan (+ 47.03%), mainly due to the increase of performance income of sales personnel; The financial expense was 85 million yuan (- 32.59%), which was mainly due to the increase of the company's interest income. The company carried out in-depth cost control and energy conservation and consumption reduction, ① implemented energy-saving transformation of equipment and repair of spare parts to improve the efficiency of equipment management and use; ② Continue to carry out inventory clearance, comprehensively revitalize the inventory surplus, strengthen the recycling and restructuring of residual waste, and effectively reduce costs and increase efficiency; ③ Promote the comprehensive budget management system, timely optimize and adjust the deposit and loan structure, and reduce interest expenses and financing costs; ④ Attach great importance to loan recovery, strictly implement accountability, strengthen the management of accounts receivable and effectively prevent business risks.
A large number of production preparation procurement and strong downstream demand: the company's notes payable (126 million yuan, + 151.96%) and accounts payable (1.326 billion yuan, + 56.04%) increased rapidly, mainly due to the company's large-scale procurement and preparation for production. In terms of inventory (2.996 billion yuan, + 34.71%), raw materials were 605 million yuan (+ 59.12%), products in process were 1.495 billion yuan (+ 29.57%), and goods in inventory were 670 million yuan (+ 43.95%). The company's contractual liabilities (320 million yuan, + 156.35%) increased rapidly, which we believe reflects the relatively strong downstream orders and demand. With the production and sales of the company's products, the performance will be thickened in the future.
Accelerate the construction of raised investment projects and help the company open the capacity bottleneck: the company's design capacity and actual capacity of titanium products in 2021 were 20000 tons and 30900 tons respectively, and the capacity under construction was 7800 tons. The company's "14th five year plan" development goal is to form a production capacity of 50000 tons of titanium products. Therefore, the company implemented a non-public private placement project in 2021, with an issuance price of 42.20 yuan / share and an actual fund-raising of 1.968 billion yuan. It mainly invested in ① high-quality titanium material production line, ② aerospace grade titanium alloy product production line, ③ testing and inspection center and scientific research pilot platform construction projects. The construction period of the above three projects is about 2 years. After the project is put into operation, It is estimated that the design capacity of titanium products of the company is expected to exceed 30000 tons in 2023. At the same time, the company strengthened the project management of technical transformation and technical measures, actively carried out the upgrading and transformation of technical equipment, and made every effort to ensure the safe and effective operation of key and important equipment.
BaoTi Huashen makes up for the profit squeezed by the price rise of sponge titanium: BaoTi Huashen, a subsidiary of the company (holding 66.67%) can meet part of the demand of the company's main material sponge titanium. Under the environment of rising price of sponge titanium in 2021, BaoTi Huashen realized a net profit of 201 million yuan (+ 135%), which can provide some compensation for the profit squeezed by the price rise of raw materials.
Aerospace demand is strong, and the company is expected to fully benefit: the high-end titanium market benefits from the upgrading and localization of aerospace and other fields, and the demand is strong. At the same time, the production capacity of high-end products in the titanium industry market is insufficient, and the market presents a situation of short supply. According to the deployment and arrangement of the company's product transformation and upgrading, the company will strive to improve the application proportion of titanium materials in aviation, aerospace, ships, weapons, deep sea and other fields, consolidate and improve the leading advantage in the medium and high-end market, accelerate the construction of raised investment projects, and improve the market share of medium and high-end titanium.
Investment suggestion: as the main supplier of titanium products in China's aerospace field, the company is expected to fully benefit from the shortage of high-end titanium products. The company's high-end product structure continues to be optimized, while strengthening internal management, reducing costs and increasing efficiency, and its profitability continues to rise. The company actively promotes the construction of raised investment projects and opens the upper limit of production capacity, which is expected to further improve the market share of medium and high-end titanium and consolidate its dominant position. We estimate that the company's operating revenue from 2022 to 2024 will be 6.867 billion yuan, 8.303 billion yuan and 9.788 billion yuan respectively, the net profit attributable to the parent company will be 753 million yuan, 949 million yuan and 1.163 billion yuan respectively, and the EPS will be 158 yuan, 199 yuan and 2.43 yuan respectively. We maintain the "buy" rating with a target price of 63.00 yuan, corresponding to 40 times, 32 times and 26 times of the predicted EPS from 2022 to 2024.
Risk tip: the construction of raised investment is less than expected, the price of raw materials rises, the prosperity of the industry decreases, and the epidemic situation repeats.
