\u3000\u3 Shengda Resources Co.Ltd(000603) 218 Riyue Heavy Industry Co.Ltd(603218) )
Event:
On April 28, 2022, the company released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company achieved a revenue of 4.712 billion yuan, a year-on-year decrease of 7.8%, and a net profit attributable to the parent company of 667 million yuan, a year-on-year decrease of 31.86%
In the first quarter of 2022, the company achieved an operating revenue of 981 million yuan, a year-on-year decrease of 21.83%, and a net profit attributable to the parent company of 60 million yuan, a year-on-year decrease of 78.15%.
Key investment points:
Affected by the industry, wind power shipments declined slightly. In 2021, the company achieved 444400 tons of casting sales, a year-on-year decrease of 3.29%. Among them, the sales volume of wind power castings was 331400 tons, a year-on-year decrease of 12.5%, the sales volume of injection molding machine castings was 101200 tons, a year-on-year increase of 35.09%, and the sales volume of other castings was 11800 tons, a year-on-year increase of 102.71%. Among them, the company’s wind power casting revenue was 3.740 billion yuan, a year-on-year decrease of 16.05%, and the injection molding machine casting revenue was 821 million yuan, a year-on-year increase of 49.74%. In 2021, China’s wind power added 47.57gw to the grid, a year-on-year decrease of 34%. We believe that the decline in the sales volume of wind power castings of the company is mainly affected by the decline in the installed demand of the industry.
Profitability is under pressure. It is expected to be repaired in 2022. The price of bulk raw materials in China fluctuated sharply in 2021, resulting in a large increase in the company’s main materials. Among them, the unit cost of pig iron, scrap steel, resin and coke increased by 28.58%, 31.36%, 54.50% and 26.65% respectively. The cost of the above four main raw materials increased by 514 million yuan compared with 2020. The company’s inventory is priced according to the weighted average method when it is issued, so we estimate that the cost factor in the third and fourth quarters of 2021 also has an impact on the first quarter of 2022. At the same time, in 2021, onshore wind power entered the era of parity, the customer’s fan price was under great pressure, and the sales price of relevant castings decreased to a certain extent. According to our calculation, the average price decreased by about 4%. We believe that the impact of raw material prices on the company has begun to weaken marginally. With the expected recovery of land wind and sea wind installed capacity in the second and third quarters of 2022, and the company has also taken measures such as coke to electricity, the company’s profitability is expected to recover.
Jiuquan, Gansu Province has been laid out, with continuous expansion of production capacity and consolidation of its leading position in the casting sector. By the end of 2021, the company has an annual casting capacity of 480000 tons. The company’s newly planned casting capacity project with an annual output of 132000 tons has started construction. After the completion of the project, a total casting capacity of more than Shanghai Pudong Development Bank Co.Ltd(600000) tons will be formed. In addition, the company announced the key component project of wind power generation with an annual output of 200000 tons (100000 tons in the first phase) in Jiuquan, Gansu Province, forming a supporting base for large castings in the “big base” in the three northern regions. In terms of finish machining, the company has an annual output of 100000 tons of finish machining capacity, and an annual output of 120000 tons of marine key castings. The processing project is expected to be completed in the second quarter of 2022, with a finish machining capacity of 220000 tons. At the same time, the 220000 ton finishing capacity of large castings invested by the company’s non-public offering in 2020 has also been started in the second half of 2021. After completion, the company will form a 440000 ton finishing capacity. With a reasonable ratio of finishing capacity, the company can reduce outsourcing processing, which is conducive to the recycling of scrap steel materials such as iron filings, so as to reduce costs. We believe that the continuous expansion of the company’s production capacity will further improve the company’s market share in fan castings and consolidate its market position. The 220000 ton finishing capacity of Xiangshan Lingang Industrial Park in Zhejiang will also consolidate the company’s position in the field of offshore wind power castings.
Profit forecast and investment rating we predict that the net profit of the company from 2022 to 2024 will reach 702 million, 1008 million and 1259 million yuan. The company is a leading company in the field of wind power castings. With the expansion of production capacity, the market share is expected to be further improved, and the “buy” rating is given for the first time.
Risks suggest that bulk raw materials continue to rise; The new installed capacity of wind power industry is less than expected; The development of offshore wind power is not as expected; The company’s new production capacity is put into operation
