\u3000\u30 Beijing Telesound Electronics Co.Ltd(003004) 28 Lizhong Sitong Light Alloys Group Co.Ltd(300428) )
Event: according to the company’s annual report of 2021 and the announcement of the first quarterly report of 2022, the company achieved an operating revenue of 18.6 billion yuan in 2021, with a year-on-year increase of 39.14%; The net profit attributable to the parent company was 450 million yuan, a year-on-year increase of 4.04%. In the first quarter of 2022, the operating revenue was 5.5 billion yuan, with a year-on-year and month on month growth of 29.12% and 0.14%; The net profit attributable to the parent company was 134 million yuan, with a year-on-year and month on month increase of 0.77% and 18.56%.
Comments:
The three sectors developed together, and the company’s performance rose steadily. In 2021, the company’s three major industrial sectors, namely, functional master alloy, recycled cast aluminum alloy and aluminum alloy wheel, overcame the pressure of overseas epidemic and chip shortage, and realized the simultaneous rise of volume and price of each sector. The company achieved an operating revenue of 18.6 billion yuan in 2021, with a year-on-year increase of 39.14%; The net profit attributable to the parent company was 450 million yuan, a year-on-year increase of 4.04%. In 2021, the sales volume of functional master alloys increased by 27.19% year-on-year to 74900 tons, the operating revenue increased by 56% to 1.61 billion yuan, and the net profit attributable to the parent increased by 62% to 108 million yuan; The sales volume of recycled cast aluminum alloy increased by 17% to 860000 tons, and the operating revenue increased by 44% to 11.78 billion yuan. The net profit attributable to the parent company increased by 79.9% to 220 million yuan; The sales volume of aluminum alloy wheels increased by 24.46% year-on-year to 14.69 million, the operating revenue increased by 24% to 5.24 billion yuan, and the net profit attributable to the parent decreased by 49.87% to 122 million yuan. In addition to the aluminum alloy wheel business, the profitability decreased in the third quarter due to the upside down of aluminum prices outside China and the rise of sea freight, and the performance of other business sectors increased significantly.
Aluminum price is strong outside and weak inside, and Q1 performance has increased significantly month on month. The company achieved an operating revenue of 5.5 billion yuan in Q1 of 2022, with a year-on-year and month on month growth of 29.12% and 0.14%; The net profit attributable to the parent company was 134 million yuan, with a year-on-year and month on month increase of 0.77% and 18.56%. Since 2022, LME aluminum price has continued to rise due to the impact of the European energy crisis, and the price difference between Shanghai and Lun has continued to expand (the average price of Lun aluminum in the first quarter is about 1295 yuan / ton higher than the average price of Changjiang aluminum excluding tax). The wheel sector will benefit from the price difference between Shanghai and Lun. In addition, the pricing of the company’s wheel export business has been linked with the sea freight. The impact of sea freight on the company’s performance is weakened, and the factors affecting the profitability of the sector are reversed compared with the second half of 2021. The performance of functional master alloy and recycled cast aluminum alloy sector increased steadily, and the high-end grain refiner of master alloy and Baotou Rare Earth plant gradually increased; Renewable cast aluminum alloy and wheel sector new energy customer orders continue to be large, which will continue to support the company’s performance growth.
The heat free faucet has a broad market. The company has applied for the patent of heat-free alloy material in 2020, breaking the foreign product monopoly and technical blockade in this field, and gradually realizing the market-oriented application of the material. At the same time, the price is 15% – 20% lower than that of foreign products. At present, the company has a broad and stable new energy vehicle customer market foundation. At present, it directly provides some products and supporting services for many new energy vehicle enterprises such as Weilai, ideal and Xiaopeng, and has completed the factory certification of an international leading new energy vehicle enterprise, laying the foundation for the product promotion of heat-free alloy materials of the company. The market space of heat-free alloy is huge. We expect that when the global output of new energy vehicles reaches 30 million (corresponding to the penetration rate of about 43%), the market space of passenger car (new energy + fuel) heat-free alloy is expected to be about 159.3/503537.2 billion yuan under the pessimistic / neutral / optimistic assumption. The market space is huge. The demand for automobile cost reduction and efficiency increase will drive the industry to usher in an explosive period.
Equity incentive increases confidence and the interests of management are deeply bound. The company announced in March 2022 that it plans to grant no more than 28.55 million shares of equity to incentive objects, accounting for about 4.63% of the total share capital of the company at the time of announcement. Among them, 22.227 million shares were granted for the first time, and the grant price was 11.09 yuan / share. The assessment conditions for the award of this incentive plan are that the net profit from 2022 to 2024 will not be less than 600 million, 720 million and 864 million, with an average annual growth rate of 20%. This equity incentive not only makes the company’s core employees deeply bound to the company’s interests, but also fully reflects and mobilizes the employees’ production enthusiasm and reflects the company’s management’s great confidence in the company’s performance development.
Earnings forecast and investment rating: we predict that the diluted earnings per share from 2022 to 2024 will be 1.06 yuan, 2.43 yuan and 3.06 yuan respectively, and the PE corresponding to the current stock price will be 15.1x, 6.6x and 5.2x respectively. Considering the stable growth of the company’s original business and the downstream demand for cost reduction and efficiency increase of heat-free alloy, it is expected to usher in an outbreak period and maintain the company’s “buy” rating.
Risk factors: the output and demand of new energy vehicles are lower than expected, the penetration rate of integrated die casting is lower than expected, and the accelerated rise of raw material prices inhibits terminal demand.
