\u3000\u3 China Vanke Co.Ltd(000002) 541 Anhui Honglu Steel Construction(Group) Co.Ltd(002541) )
Event description:
The company released the performance report for the first quarter of 2022: Q1 company achieved an operating revenue of 3.519 billion yuan in 2022, with a year-on-year increase of 7.03%; The net profit attributable to the parent company was 167 million yuan, a year-on-year increase of – 8.26%; The non net profit deducted was 97 million yuan, a year-on-year increase of – 23.95%.
Comment event:
The company’s performance was slightly lower than our expectations, and the epidemic in East China affected the pace of shipment,
The shipment volume is slightly lower than the production volume, resulting in the deviation of the ton index from the actual profitability, and the enhancement trend of the company’s annual ton profitability remains unchanged. According to the calculation of production volume, the quarterly gross profit margin of the company since 2021q1 is 659.3 yuan / 622.4 yuan, 715.7 yuan / 731.7 yuan / 813.2 yuan / 574.4 yuan; The net profit is 238.6 yuan / ton. Various ton profit indicators of Q1 have declined. We judge that it is mainly due to the impact of the epidemic in the first quarter of this year on the pace of shipment, and the sales volume is lower than the output, resulting in the ton index measured by the output deviating from the actual profit level. We estimate that the sales volume of Q1 is about 560000 tons, slightly lower than the 700000 tons corresponding to the production volume. After adjustment, the company’s gross profit of Q1 tons was 717.1 yuan, a year-on-year increase of + 94.6 yuan; The net profit per ton was 297.3 yuan, a year-on-year increase of + 32.06 yuan.
We expect the demand side and profitability to pick up quarter by quarter, and the market of Honglu benefiting from steady growth has just begun.
Orders: the newly signed sales contract amount of Q1 of the company in 2022 was 6.013 billion yuan, with a year-on-year increase of 14.71%. We calculated that the newly signed production volume of Q1 was about 920000 tons. Among them, large orders totaled 2.2 billion yuan, accounting for 36.59%, highlighting the comprehensive strength of obtaining large orders. The newly signed contract amount of the company is expected to increase quarter by quarter, and the stimulating effect of steady growth will begin to appear in the middle reaches. There is a time lag of 3-6 months for the transformation of construction contracts into steel structure orders in the downstream construction industry. The newly signed contract amount in the construction industry has continued to increase since reaching the bottom in October last year, and the newly signed contract amount of CSCEC / China Railway / MCC in Q1 has increased by 39.29% / 94.1% / 12.09% in turn. We expect Q2 in the middle reaches of the construction industry to enter a high boom stage.
Capacity and output: the company’s Q1 capital expenditure reached 457 million yuan, the construction in progress increased by 258 million yuan, and the capacity will increase from the current 4.2 million tons to 5 million tons by the end of the year. With the post epidemic repair superimposed on the rising demand in the downstream, the production and sales of Q2 are expected to exceed one million tons. It is expected to maintain a quarterly warming trend throughout the year. We maintain the output of 4.24 million tons.
Profitability: the most pessimistic time point of cost expectation can be more optimistic. Honglu’s raw material turnover days are about 192 days. By the end of the first quarter, the peak period of Q3 raw material price last year has passed, and the gross profit margin level (proportion of processing fees) will rise quarter by quarter. The high cost of raw materials in 2021 and the steady rise in the profit per ton are the embodiment of Anhui Honglu Steel Construction(Group) Co.Ltd(002541) excellent business model. Looking forward to the whole year of this year, the scale advantage of the company in procurement, manufacturing, management and other expenses will be more significant, and the profit per ton is expected to continue to improve.
The importance of steady growth cannot be ignored. The layout of midstream industries with upward flexibility in performance can not be ignored. Q1 economy is affected by the epidemic, and the importance of steady growth will become the consensus of the whole society. The middle reaches of the construction industry is in the early stage of demand transmission, and the stock price and expectation are still on the left. We maintain our key recommendation for Honglu.
Investment suggestion: we are optimistic about the continuous improvement of the company’s output and the continuous improvement of unit profitability. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 1.428 billion yuan, 1.808 billion yuan and 2.053 billion yuan respectively, corresponding to EPS of 2.69 million yuan, 3.41 million yuan and 3.87 yuan, maintain the target price of 58 yuan and continue to give the “buy” rating.
Risk tip: the investment in fixed assets shrank, the penetration rate of steel structure declined, and the orders obtained by the manufacturing mode were less than expected.
