\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 388 Ye Chiu Metal Recycling (China) Ltd(601388) )
On April 26, 2022, the company released the annual report of 2021. In 2021, the company achieved a revenue of 8.283 billion yuan, a year-on-year increase of 47.2%; The net profit attributable to the parent company was 852 million yuan, a year-on-year increase of 84.4%; Net profit deducted from non parent company was 850 million yuan, with a year-on-year increase of 92.3%. In 2021q4, the company achieved a revenue of 2.28 billion yuan, an increase of 44.1% year-on-year and 11.1% month on month; The net profit attributable to the parent company was 199 million yuan, an increase of 6% year-on-year and a decrease of 12.1% month on month; The net profit deducted from non parent company was 199 million yuan, with a year-on-year increase of 20.8% and a month on month decrease of 10.5%. The performance meets the forecast.
The year-on-year growth of net profit attributable to the parent company in 2021 was mainly due to the expansion of price difference of refined and waste aluminum and the substantial growth of sales volume of waste trade during the reporting period. Price difference of refined and waste aluminum: in 2021, the price difference of refined and waste aluminum reached 4070.2 yuan / ton, a year-on-year increase of 13.89%. Sales volume: among the company’s main products in 2021, the sales volume of waste trade increased significantly by 48.46% to 702000 tons year-on-year, while the sales volume of aluminum alloy ingots and leftovers decreased by 10.76% / 1.18% to 29.051000 tons respectively. The sales growth of waste trade is mainly due to the company’s acquisition of Gillard plant in Ohio at the end of 2020. The decrease in sales of aluminum alloy ingots is mainly due to the impact of the outbreak in Malaysia from July to August 2021. At present, the epidemic in Malaysia is stable and the impact has been eliminated. Cost: in 2021, the sales cost of the company’s aluminum ingots was 12700 yuan / ton (excluding tax), while the annual average price excluding tax of Nantong broken aluminum was 13400 yuan / ton. The sales cost of the company is only 94.8% of that of Nantong broken aluminum, which has obvious cost advantages. This is mainly because the company has the advantage of global procurement and can purchase raw materials with low cost overseas.
In 2021q4, the net profit attributable to the parent company decreased by 27.44 million yuan month on month. In terms of spin off, the decrease in net profit attributable to the parent company was mainly due to the increase in impairment loss (profit reduction of 43.15 million yuan) and income tax (profit reduction of 18.84 million yuan). The impairment loss may mainly come from the decline in inventory price caused by the decline in aluminum price in Q4. At the same time, there is a reversal of impairment in Q3, so there are great changes month on month. The profit increase points mainly include the gross profit increase of 52.76 million yuan month on month, or the base number is low due to the impact of the epidemic in Malaysia on the production and sales of Q3 aluminum ingots.
Core focus: low cost + high growth, recycled aluminum veteran will glow with new vitality. ① Low cost: the core advantage of the company lies in the comprehensive cost advantage brought by the waste aluminum recycling system outside China and the aluminum alloy production base in Malaysia. According to SMM data, as of April 26, 2022, the average price difference of waste aluminum between the United States and China in 2022 reached 5074 yuan / ton. Considering that the company has the advantage of digital procurement through Metalico, the actual price of waste aluminum in the United States may be lower. ② High growth: the 1.3 million ton production expansion project in Malaysia has been started, and the first phase of 650000 tons is expected to be put into operation in the second half of 2023. After reaching the production capacity, the company’s total capacity in Malaysia will reach 1569800 tons, an increase of 482% compared with the original capacity of 269800 tons.
Profit forecast and investment suggestion: the global layout of the company’s waste aluminum acquisition end has the advantage of purchasing raw materials at a low price. With the improvement of waste aluminum recovery capacity, the capacity utilization rate of the company’s aluminum ingot production has great room for improvement. The 1.3 million ton project in Malaysia will open a long-term growth space. It is assumed that 650000 tons of phase I of the project will be put into operation in the second half of 23 years, contributing an increment of 300000 tons in that year. We raised the profit forecast of the company. It is expected that the company will realize the net profit attributable to the parent company of 1.094 billion yuan, 1.538 billion yuan and 2.385 billion yuan from 2022 to 2024. The PE corresponding to the closing price on April 26 is 7x, 5x and 3x, maintaining the “recommended” rating.
Risk tip: the progress of the project is not as expected, the price difference of refined and waste aluminum decreases, and the import and export policy of waste aluminum changes
