\u3000\u30 China Baoan Group Co.Ltd(000009) 32 Hunan Valin Steel Co.Ltd(000932) )
Event overview: on April 29, the company released its 2021 annual report and the first quarterly report of 2022: in 2021, the company achieved a revenue of 171575 billion yuan, a year-on-year increase of 47.24%; The net profit attributable to the parent company was 9.68 billion yuan, a year-on-year increase of 51.36%; Net profit deducted from non parent company was 9.574 billion yuan, with a year-on-year increase of 50.17%. In 2021q4, the company achieved a revenue of 36.055 billion yuan, a year-on-year increase of 7.91% and a month on month decrease of 28.56%; The net profit attributable to the parent company was 1.916 billion yuan, with a year-on-year increase of 23.00% and a month on month decrease of 12.49%; Net profit deducted from non parent company was 1.845 billion yuan, with a year-on-year increase of 18.73% and a month on month decrease of 15.00%. In 2022q1, the company achieved a revenue of 41.105 billion yuan, a year-on-year increase of 6.36% and a month on month increase of 14.01%; The net profit attributable to the parent company was 2.111 billion yuan, an increase of 2.82% year-on-year and 10.21% month on month; The net profit deducted from non parent company was 2.049 billion yuan, with a year-on-year increase of 0.12% and a month on month increase of 11.06%.
Comments: the company’s production and sales increased steadily, and Q1 performance met expectations
① volume: the production and sales volume of the company increased steadily in 2021. In 2021, the output of steel products of the company was 25.57 million tons, with a year-on-year increase of 1.65%, and the sales volume was 25.75 million tons, with a year-on-year increase of 2.48%.
② price: raw materials increased significantly, and the company’s annual gross profit margin decreased. In 2021, the price of iron ore, the main raw material of steel, was + 49.06%, the price of main coking coal was + 80.75%, the price of coke was + 50.08%, and the price of scrap steel was + 29.69%. Due to the sharp rise in raw materials, the company’s gross profit margin fell 1.42pct to 13.06% in 2021. The gross profit fell by q2.2 billion yuan in the quarter, mainly due to the decline in the price of steel.
③ in 2022q1, the net profit attributable to the parent company increased year on year. The main profit increasing points are gross profit, other / investment income and income tax; The main profit reduction points include expenses, taxes and changes in fair value
Core focus in the future: regional leaders and accelerated optimization of product structure
① regional leader, southern high-quality steel production base. The company has production bases in Xiangtan City, Loudi City, Hengyang City and Yangjiang City, Guangdong Province, with full process technical equipment, complete product structure and a wide range of downstream industries. The company actively promoted the transformation of variety structure from “medium and low-end” to “medium and high-end”, accelerated the upgrading of production line structure and increased R & D investment. In 2021, the company replaced “import” with 61 steel grades of 13 major varieties, and completed the sales volume of key varieties of steel of 14.1 million tons, accounting for 55%, an increase of 3 percentage points over 2020.
② the company invested in the cold-rolled silicon steel project and optimized and upgraded the product structure. With the expansion of silicon steel application scenarios and the growing market demand for medium and high grade silicon steel, Hunan Valin Lianyuan Iron and Steel Co., Ltd., a wholly-owned subsidiary of the company, plans to build a new phase I project of cold-rolled silicon steel products, with a transaction volume of 3.137 billion yuan and a construction period of 32 months. After the project is completed, it will achieve an annual output of 400000 tons of non oriented silicon steel, 200000 tons of non oriented silicon steel cold hard coil and 180000 tons of oriented silicon steel cold hard coil. This project is conducive to further optimize and upgrade the product structure, enhance the market competitiveness of the company, and accelerate hualinglian steel to become the most competitive cold-rolled silicon steel production base in China.
Profit forecast and investment suggestions: as a leading enterprise in Hunan, the company’s product structure has been continuously optimized and upgraded. We expect the company to realize a net profit attributable to the parent company of 9.699/10.192/11.352 billion yuan from 2022 to 24. Corresponding to the closing price on April 29, PE is 4, 4 and 4 times respectively. It is covered for the first time and rated “recommended”.
Risk tip: the price of raw materials fluctuates at a high level, the downstream demand is less than expected, and the covid-19 epidemic continues to affect.
