\u3000\u3 China Vanke Co.Ltd(000002) 645 Jiangsu Huahong Technology Co.Ltd(002645) )
Core view:
Event:
The company released its 2021 annual report, and achieved a revenue of 6.775 billion yuan, a year-on-year increase of 100.75%; The net profit attributable to shareholders was 532 million yuan (excluding 498 million yuan), a year-on-year increase of 136.20% (excluding 168.26%). Roe (weighted) was 16.18%, a significant increase of 7.64 percentage points. The net cash flow was 195 million yuan, a year-on-year decrease of 19.72%. The dividend plan for 2021 is: cash dividend of 1 yuan (including tax) for every 10 shares.
Rare earth recycling leads, all sectors make concerted efforts, and the company’s operation continues to improve.
During the reporting period, the gross profit margin and net profit margin of the company’s sales were 15.71% and 7.99% respectively, with a year-on-year increase of 1.48 and 1.21 percentage points, the expense rate during the period was 0.65 percentage points to 7.70%, and the overall profitability increased slightly; The asset liability ratio was 30.27%, with a year-on-year increase of 6.63 percentage points, still at a relatively low level; The current ratio and quick ratio are 1.96 and 0.67 respectively, and the overall debt risk is low. The cash to cash ratio was 109.85%, which remained at a good level.
During the reporting period, all business segments of the company achieved significant growth under the guidance of rare earth recycling business: rare earth recycling achieved a revenue of 3.252 billion yuan, a year-on-year increase of 206.15%; The revenue of renewable resources processing equipment was 1.476 billion yuan, a year-on-year increase of 58.94%; The operation of scrap steel and scrapped cars achieved a revenue of 1.104 billion, a year-on-year increase of 76.96%; The revenue of elevator parts reached 899 million, a year-on-year increase of 24.12%.
In the context of double carbon, the demand for rare earths has improved, and the demand for new energy vehicles and industrial motors has increased significantly. China’s rare earth mining and smelting capacity occupies a leading position in the world. The global short-term supply increment mainly comes from the growth of China’s total amount control indicators. In 2022, the total control indicators of the first batch of rare earth mining, smelting and separation were 100800 tons respectively, with a year-on-year increase of 20%. On the demand side, rare earth materials have a good prospect under the background of carbon neutralization. High performance rare earth permanent magnet materials are the core materials in the fields of new energy, energy conservation and environmental protection: we calculate that new energy vehicles are the downstream with the largest demand increment of rare earth permanent magnet materials, and the demand for praseodymium and neodymium is expected to reach 246 ~ 41000 tons in 2025; The demand of rare earth permanent magnet industrial motor corresponding to praseodymium and neodymium in 2025 is expected to reach 15000 tons; The demand for praseodymium and neodymium of wind power permanent magnet motor is expected to double to about 12000 tons in 2025.
The significant growth of carbon reduction in electric furnace steelmaking confirms that the scrap industry chain is expected to continue its high prosperity. The carbon emission of the steel industry accounts for 15% of the country, and it is the manufacturing industry with the largest proportion. The carbon emission intensity per ton of steel in long process is about 1.46 tons of CO2 / ton of steel, while that in short process electric furnace is 0.08 tons, which has a significant carbon reduction effect. Therefore, the development of EAF steel is an effective means to promote carbon emission reduction in the industry. The guiding opinions on promoting the high-quality development of iron and steel industry and other policies encourage the development of short process steelmaking. Scrap steel is the main carbon raw material for short process EAF steelmaking, which will significantly benefit from the growth of EAF steel production capacity. In 2021, China’s steel-making scrap was about 233 million tons, accounting for 22.56% of the crude steel output. Compared with the international average of 36%, this level has great room for improvement; At the same time, China has entered the high growth cycle of automobile scrap, which will also become one of the important growth points of the scrap industry chain.
Valuation analysis and rating description
It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 777 million, 1044 million and 1344 million respectively, and the corresponding PE will be 14x, 10x and 8x. The continuous release of the company’s rare earth recovery capacity is expected to promote the continuous high growth of performance and maintain the “recommended” rating.
Risk tips:
Rare earth prices fluctuate more than expected, and there is a risk of ineffective control of scrap steel and elevator gross profit margin.
