\u3000\u30 China Baoan Group Co.Ltd(000009) 32 Hunan Valin Steel Co.Ltd(000932) )
Event:
Hunan Valin Steel Co.Ltd(000932) release report: in 2021, the net profit attributable to the parent company was 9.68 billion yuan, an increase of 51.4% year-on-year; The company announced the profit distribution plan for 2021, with a dividend of 0.29 yuan per share. In 2022, Q1 company realized a net profit attributable to its parent company of 2.11 billion yuan, a year-on-year increase of 2.8%.
Comments:
The profit exceeded expectations and was more stable than the industry: the net profit attributable to the parent company of 2021q4 and 2022q1 in a single quarter was 1.92 billion yuan and 2.11 billion yuan respectively, with a month on month increase of – 12% and 10% respectively. The month on month increase was significantly better than that of the same industry. This performance can still be maintained in the case of significant upward cost in 2021q4 and weak supply and demand in 2022q1 iron and steel industry, and the robustness is better than that of the industry.
Continuous improvement in management and leading labor productivity in the industry: in 2021, the company’s asset liability ratio was 52.28%, a year-on-year decrease of 5.26 percentage points, 34.62 percentage points lower than the historical maximum; The financial expenses in the reporting period were 263 million yuan, a year-on-year decrease of 56.03%, a decrease of 2.498 billion yuan compared with the historical highest value in the same period. In 2021, the company’s main subsidiaries produced more than 1500 tons of steel per capita, and continued to maintain the advanced level of the industry.
Speed up the upgrading of production lines and realize import substitution through technology research and development: 1) the subsidiary Xianggang 5m wide sector plant tempering furnace, RH furnace of steel plant, heat treatment line of Lianyuan Steel High Strength Steel Phase II project and 2 galvanizing line for high-end household appliances have been completed and reached production capacity, and the construction of Vama phase II project is also advancing rapidly; 2) In 2021, the company realized import substitution for 61 steel grades in 13 categories, driving the transformation of product structure from medium and low-end homogenization to medium and high-end high-quality differentiation.
Iron and steel industry: supply and demand improved under production reduction. The regular meeting of the national development and Reform Commission said that it would continue to reduce output in 2022; At present, horizontal control is the bottom line, and there is a high probability of continued production reduction. After the epidemic situation is alleviated, the steel industry will face a triple demand recovery of seasonality and the superposition of project delay and export at the beginning of the year. It is predicted that the steel demand will increase by 1-2% in the whole year; Steel fundamentals are expected to usher in a situation of rising steel prices and increasing profits.
Profit forecast and investment rating: we predict that the operating revenue of the company from 2022 to 2024 will be 175.4/180.8/177.6 billion yuan respectively, with the corresponding growth rate of 2% / 3% / – 2% respectively; Based on the company’s performance, we adjusted the net profit attributable to the parent company from RMB 11.5 billion / 10 billion to RMB 9.8 billion / 10.2 billion from 2022 to 2023, that is, the net profit attributable to the parent company from 2022 to 2024 was RMB 9.8 billion / 10 billion respectively, with a corresponding growth rate of 1% / 4% / – 2% respectively; Corresponding PE is 4.1 / 4.0 / 4.0X; Considering the continuous optimization of the company’s product structure and significant improvement in quality and efficiency, the “buy” rating of the company is maintained.
Risk warning: price fluctuation of raw materials; Risk of senior management change; Environmental protection costs exceeded expectations.
