\u3000\u30 Shenzhen Quanxinhao Co.Ltd(000007) 08 Citic Pacific Special Steel Group Co.Ltd(000708) )
Event: the company released the 2021 annual report and the first quarterly report of 2022: the company achieved a revenue of 97.33 billion yuan in 2021, a year-on-year increase of 27.6%, and a net profit attributable to the parent company of 7.95 billion yuan, a year-on-year increase of 31.8%; In 2022q1, the revenue was 24.58 billion yuan, a year-on-year increase of 6.9%, and the net profit attributable to the parent company was 1.95 billion yuan, a year-on-year increase of 0.9%.
Comments:
Outstanding profitability and strong performance through the cycle. In 2021q4, when the price of raw fuel soared and the performance of steel industry generally declined month on month, the company realized a net profit attributable to the parent company of 1.89 billion yuan in 2021q4, which still increased month on month, reflecting the strong profitability toughness of the company; The company has achieved seven consecutive years of performance growth from 2014 to 2021.
The proportion of variety steel continues to be optimized. In 2021, the company’s bearing steel and automobile steel reached a record high, with bearing steel exceeding 2 million tons, and the sales volume increased by 17.7% year-on-year, ranking first in the world for 11 consecutive years; The sales volume of automobile steel exceeded 3 million tons, ranking first in China for 14 consecutive years; Energy steel has paid close attention to the demand of wind power market, and the annual sales volume of continuous casting round billet has reached a record high.
The industrial layout has been continuously improved. In January 2021, the company successfully took shares in Tianjin steel pipe and fully participated in production, operation and management. The actual annual output of seamless steel pipe under control exceeded 5 million tons, ranking first in the world. The 10000 ton iron alloy project is also continuously promoted by the company. In 2021, the company issued 5 billion yuan of convertible bonds, which were approved by the CSRC and successfully issued.
Special steel industry: the demand for special steel will still increase. The main downstream of special steel is automobile manufacturing, industrial manufacturing, etc. According to CISA, China’s special steel production accounted for only 10% in 2020, while Japan’s special steel production accounted for 21% in the same period, with a large gap. Compared with developed countries, China’s special steel industry has the current situation of low concentration and low proportion of high value-added products, which means that the proportion of China’s special steel still has great room to improve.
Citic Pacific Special Steel Group Co.Ltd(000708) : from special steel leaders to M & A experts, the production capacity of Jianzhi is 20 million tons. As the leader of special steel in China, the company is also a high-end special steel enterprise with the most complete steel varieties and the widest coverage in the world. Through multiple mergers and acquisitions, the company’s special steel production in China accounted for nearly 11% in 2020, and its core products were positioned as medium and high-end. The company said that it will strive to achieve a production capacity of 20 million tons during the 14th Five Year Plan period.
Profit forecast and investment rating: we expect the company’s revenue to be 100.7/104.9/110.6 billion yuan from 2022 to 2024, with a year-on-year growth rate of 3% / 4% / 5% respectively; From 2022 to 2024, the profit attributable to the parent company was 94 / 106 / 11.8 billion yuan respectively, with a year-on-year growth rate of 18% / 13% / 12% respectively, and the corresponding PE was 9.3 / 8.3 / 7.4 times respectively; Considering that the company is the leader of China’s special steel and its valuation is still at a low level, the “buy” rating of the company is maintained.
Risk tip: the demand growth of special steel is less than expected; Raw material iron ore prices rose more than expected.
