\u3000\u3 Shengda Resources Co.Ltd(000603) 218 Riyue Heavy Industry Co.Ltd(603218) )
Matters:
The company released the 2021 annual report and the first quarterly report of 2022. In 2021, the revenue was RMB 4.712 billion, a year-on-year decrease of 7.8%, the net profit attributable to the parent was RMB 667 million, a year-on-year decrease of 31.86%, and the net profit after deduction was RMB 562 million, a year-on-year decrease of 41.39%; It is proposed to distribute a cash dividend of 2.5 yuan (including tax) for every 10 shares. In the first quarter of 2022, the revenue was 981 million yuan, a year-on-year decrease of 21.83%, and the net profit attributable to the parent company was 60 million yuan, a year-on-year decrease of 78.15%.
Ping An View:
The squeeze at both ends led to a significant decline in the company's performance. In 2021, the company's net profit after deducting non-profit was 562 million yuan, a year-on-year decrease of 41.39%, showing a significant decline. The sales volume of the company's castings fell by 33000 tons year-on-year, although the sales volume of the company's castings fell by 35009 tons year-on-year, which was still a year-on-year decrease of 350000 tons. From the perspective of profitability, casting enterprises are facing the squeeze of downstream wind turbine customers and upstream bulk raw materials. In 2021, the revenue per ton of fan castings was 11300 yuan, a year-on-year decrease of about 4%, while the cost per ton was 9000 yuan, a year-on-year increase of 7.8%; According to the data disclosed by the company, in 2021, the unit cost of pig iron feeding increased by 28.58%, scrap steel increased by 31.36%, resin increased by 54.50% and coke increased by 26.65%, jointly promoting the year-on-year increase of about 944 yuan in the cost of raw materials per ton of wind power castings. On the whole, the company's shipment volume, single ton revenue and gross profit margin are lower than expected, which indicates that the overall competition in the wind power casting industry has intensified to a certain extent.
Short term profitability continues to be under pressure, and cost reduction is the key in the future. Since 2021, the company's gross profit margin has declined quarter by quarter. The comprehensive gross profit margin in 2022q1 is 8.73%, down 3.11 percentage points month on month, which is an absolute low in recent years. In the short term, the company's profitability and cost control have weakened compared with its main competitors. In the future, we need to take more measures to reduce costs in order to improve cost competitiveness; According to the information disclosed by the company, in view of the high and rising price of main raw materials in 2021, the production department and the technical department will jointly promote the implementation of technology improvement and process optimization schemes by continuously improving the substitution scheme of smelting materials and optimization of modeling material consumption in 2022, so as to ensure the effective improvement of the comprehensive scrap rate of products and reduce the comprehensive cost of products.
Fearless of the downturn in the industry, speed up capacity expansion. The company's annual output of 180000 tons of offshore key castings (80000 tons in phase II) project has been completed in 2021q4. Up to now, the company has an annual output of 480000 tons of casting capacity, including more than 180000 tons of large megawatt fans for offshore wind power; In addition, the construction of large-scale casting capacity with an annual output of 132000 tons has begun. In terms of finishing, the annual output of 120000 tons of marine core casting finishing project is expected to reach production in 2022q2, and the annual output of 220000 tons of finishing project has been started. After the completion of these projects, the company will have a finishing capacity of 440000 tons. According to the company's announcement, the company plans to build a new Northwest production base and build a casting and machining production line with an annual output of 200000 tons of key components of wind power generation in Jiuquan, including 100000 tons in the first phase. We estimate that by the first half of 2022, the casting blank capacity is expected to be close to 700000 tons and the finishing capacity is expected to reach 540000 tons.
Investment advice. Considering the current development pattern of the fan industry chain and adjusting the company's profit forecast, it is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 491 million (original value of 1.323 billion), 1.021 billion (original value of 1.641 billion) and 1.361 billion (new value), the corresponding EPS will be 0.51, 1.06 and 1.41 yuan, and the dynamic PE will be 30.8, 14.8 and 11.1 times. Although the short-term profit level is obviously under pressure, the company is leading the industry in terms of the capacity scale of wind power castings, and the subsequent technological transformation is expected to reverse the current weakening of cost advantage; The wind power industry has broad prospects. For the company, offshore wind power with relatively high added value has huge growth space. With the rapid growth of demand, the company's capacity utilization is also expected to improve; To sum up, we believe that the industry boom is improving, the company's competitive advantage is expected to expand, the profitability is expected to repair, and the company's "recommended" rating is maintained.
Risk warning. 1. The demand of wind power market outside China is affected by policies, epidemic situation and other factors, and there is a certain degree of uncertainty. 2. The main raw materials of the company are pig iron and scrap steel. If the price of raw materials rises sharply in the future, the comprehensive gross profit margin may be lower than expected. 3. The construction of new production capacity involves environmental protection, energy assessment and other factors, and there may be a risk that the construction progress is less than expected.
