\u3000\u30 China High-Speed Railway Technology Co.Ltd(000008) 25 Shanxi Taigang Stainless Steel Co.Ltd(000825) )
Event: the company released the annual report of 2021, and the annual revenue was 101437 billion yuan, a year-on-year increase of + 50.5%, and the net profit attributable to the parent company was 6.31 billion yuan, a year-on-year increase of + 263.6%; In 2021q4, the revenue was 26.786 billion yuan, a month on month increase of – 2.0%, a year-on-year increase of + 39.74%, and the net profit attributable to the parent company was -487 million yuan, a month on month decrease of 123.6%, a year-on-year decrease of – 173.3%; In 2022, Q1’s revenue was 23.204 billion yuan, a month on month ratio of – 13.4%, a year-on-year ratio of + 9.0%, and the net profit attributable to the parent company was 1.272 billion yuan, a year-on-year ratio of – 31.8%.
In 2021, the company’s steel volume and price rose simultaneously, and its performance reached a record high. In 2021, the company’s crude steel output was 127314 million tons, a year-on-year increase of + 19.11%, including 4.4724 million tons of stainless steel, a year-on-year increase of + 6.78%; The output of carbon steel was 8.259 million tons, a year-on-year increase of + 27.06%; The gross profit per ton of stainless steel was 1599.5 yuan, a year-on-year increase of + 53%, and the gross profit per ton of carbon steel was 828.79 yuan, a year-on-year increase of + 49.6%.
In 2022, the company’s crude steel output target decreased slightly year-on-year, and the rising cost of Q1 stainless steel led to a year-on-year increase in the net profit attributable to the parent company of – 32%. In 2022, the company’s crude steel production target is 12.69 million tons, with a year-on-year increase of – 0.33%. Among them, the output of stainless steel is 4.5 million tons, with a year-on-year increase of + 0.62%, and the output of carbon steel is 8.19 million tons, with a year-on-year increase of – 0.84%. According to the data of Baichuan Yingfu, the cost of stainless steel industry in 2022q1 was + 41.69% year-on-year, and the price of stainless steel was + 24.70% year-on-year. The narrowing of industry profit led to the net profit attributable to the parent company in Q1 being – 31.8% year-on-year.
TISCO group has a production capacity of 13 million tons of iron ore, and the company has preferential iron ore purchase prices. In 2021, TISCO group has an annual production capacity of 13 million tons of iron concentrate powder. The transaction price of iron concentrate and pellets sold to the company is determined based on the principle that it is not higher than the CIF price of the same variety and quality imported from China in the first half of the year before the adjustment plus the railway freight from Qingdao Port International Co.Ltd(601298) to the company. The price of related party transactions shall be subject to price preference on the maximum amount of the above pricing principles, and the amount of preference shall not be less than 15% of the average quotation of the Customs for the same variety and quality imported from China in the first half of the year.
The company’s capital increase to acquire 51% equity of Xinhai industry is expected to bring 3.8 million tons of stainless steel production capacity injection. According to the announcement in April 2022, the company signed the capital increase agreement between Shanxi Taigang Stainless Steel Co.Ltd(000825) and Linyi Xinhai New Material Co., Ltd. on Shandong Xinhai Industrial Co., Ltd. with Xinhai new materials and Xinhai industry, and the company plans to increase the capital of Xinhai industry by 393 million yuan. After the capital increase, the company holds 51% equity of Xinhai industry. In the future, Xinhai Technology plans to build an annual production capacity of 3.8 million tons of high-end stainless steel. As the core stainless steel sector of Xinhai Technology, Xinhai industry is expected to increase the company’s performance after the capital increase.
The equity incentive exercise conditions correspond to that the company’s net profit attributable to the parent company after deducting non-profit from 2022 to 2024 is dominant in the industry: according to the external report “friendly policies, low valuation, firm optimistic about medium-term investment opportunities in the iron and steel sector” issued on April 13, according to the company’s equity incentive exercise conditions, the non-net profit attributable to the parent company from 2022 to 2024 is respectively 38.8/46.2/5.25 billion yuan, and the PE is 9.8/8.2/7.3 times corresponding to the stock price on April 22.
Profit forecast, valuation and rating: due to the sharp rise in the cost of stainless steel industry, we lowered the profit forecast of Shanxi Taigang Stainless Steel Co.Ltd(000825) 20222023 by 44.23% and 42.68% to RMB 5.381 billion and RMB 5.645 billion, corresponding to EPS of RMB 0.94 and RMB 0.99 respectively; The new profit forecast for 2024 is 5.986 billion yuan, corresponding to EPS of 1.05 yuan. As a leading enterprise in the stainless steel industry, Shanxi Taigang Stainless Steel Co.Ltd(000825) there are still new production capacity expectations in the future, maintaining the “overweight” rating.
Risk tip: the demand for stainless steel has fallen sharply; The price of raw materials has risen sharply.
