\u3000\u30 China High-Speed Railway Technology Co.Ltd(000008) 25 Shanxi Taigang Stainless Steel Co.Ltd(000825) )
Events
The company released its 2021 annual report and the first quarterly report of 2022 on the evening of April 22. In 2021, the company achieved a revenue of 101437 billion yuan, a year-on-year increase of 50.46%; The net profit attributable to the parent company was 6.31 billion yuan, a year-on-year increase of 263.63%; EPS is 1.108 yuan. In the first quarter of 2022, the company achieved a revenue of 23.204 billion yuan, a year-on-year increase of 9.03%; The net profit attributable to the parent company was 1.272 billion yuan, a year-on-year decrease of 31.80%; EPS is 0.223 yuan.
Commentary
Q1 significantly improved month on month. In 21 years, the company made provision for impairment of various assets of RMB 1.768 billion, resulting in the performance of Q4 falling short of expectations. The net profit attributable to the parent company of Q1 turned around month on month, and the steel profit improved. The comprehensive gross profit margin of Q1 was 10.46%, with a month on month increase of 7.37pcts and a year-on-year decrease of 5.49pcts. In Q2, the demand for infrastructure and real estate grew steadily, and the steel performance of the company is expected to recover gradually. In 21 years, the company sold 120826 million tons of steel, including 4.1432 million tons of stainless steel, with a year-on-year increase of 9.38%, and the average sales price increased by 26.8%. In 22 years, the company plans to produce 12.69 million tons of steel, including 4.5 million tons of stainless steel.
M & A of Xinhai to expand production capacity, with strong logical certainty of “volume increase”. The company is a leading stainless steel enterprise in China. After increasing capital and holding 51% of Xinhai industry, it will increase 1 million tons of stainless steel equity production capacity. The company proposes to increase the stainless steel production capacity to 15 million tons by the end of 2023, quadruple it in three years, and seek the position of the world’s leading enterprise in the field of stainless steel mainly through mergers and acquisitions and overseas layout; At the end of the 14th five year plan, the scale of stainless steel was 18 million tons, the scale of revenue was 200 billion and the level of profit was 10 billion.
The group guarantees the supply of raw materials and has a significant cost advantage. The group has a capacity of 13 million tons of refined iron powder, with a cost of 60-70 US dollars / ton. The self supply rate of iron ore and coking of the corresponding company is 100% and 90%. TISCO, Vale Indonesia and Xinhai Technology will jointly build and operate the ferronickel project in morowali County, Indonesia, with a self-sufficiency rate of more than 30% and more than 50% of nickel and chromium resources. The process cost of rkef + AOD “new integrated method” is reduced by at least 1000 yuan, and the profitability of the company using the new process is expected to continue to improve.
Profit forecast & investment suggestions
Considering that the new capacity of Xinhai industry began to be released gradually in 23 years, the net profit attributable to the parent company in 22-23 years was reduced by 6% and 20%. It is estimated that the net profit attributable to the parent company in 22-24 years will be 8.413 billion yuan, 10.073 billion yuan and 11.026 billion yuan respectively, with corresponding EPS of 1.48 yuan, 1.77 yuan and 1.94 yuan respectively, and corresponding PE of 5 times, 4 times and 3 times respectively. Maintain the “buy” rating.
Risk tips
Price fluctuation risk of steel products; Controlling production leads to the decline of production; M & A and overseas layout did not meet expectations.
