\u3000\u3000 Zhejiang Jiuli Hi-Tech Metals Co.Ltd(002318) (002318)
Investment logic
China’s leader in high-end stainless steel pipes. The company mainly produces stainless steel seamless pipes and stainless steel welded pipes for industrial use. At present, it has an annual production capacity of 120000 tons of industrial stainless steel pipes, accounting for 7% – 8% in China, ranking first in the industry. Petrochemical and natural gas in downstream applications account for 50% – 60%, power equipment 15% – 20% and machinery manufacturing 15% – 20%. Many products are imported instead.
High end products continued to be promoted. At present, the revenue of high-end products with a selling price of more than 100000 yuan / ton and a gross profit margin of more than 30% accounts for 18%. With the production of new projects, the proportion of high-end products will continue to increase.
Nickel base alloy oil well pipe: the company is one of the “duopoly” in China, with an annual production capacity of 3000 tons and an elastic production capacity of 10000 tons. It is expected that the oil and gas production end orders will remain high in 22 years. After the company’s overseas certification is passed, the overseas market is expected to add 1500 tons of sales in 22 years, with a total sales volume of 3000 tons, a year-on-year increase of 100%. After import substitution, the current price is about 200000 yuan / ton.
Evaporator U-shaped heat transfer tube: the company is one of the only two manufacturers with manufacturing qualification in China, with an annual capacity of 500 tons, a capacity utilization rate of about 20% and a price of about 600000-700000 yuan / ton. 690 nickel base alloy, 800 nickel base alloy evaporator U-shaped heat transfer tube and other products have covered nuclear safety class 1, 2 and 3 pipelines and non nuclear pipelines for systems and equipment of nuclear island and conventional island.
Aerospace pipe: according to the company’s announcement, the project of “annual output of 1000 tons of aerospace materials and products” has been put into operation in December 2021. The main products include aviation oil pipeline, high-strength superalloy pipeline, gas circuit pipeline, etc. the future development space of aerospace pipe is worth looking forward to.
Alloy company: research and develop high-end alloy products + ensure the supply of raw materials. In 2014, the company (51%) and Yongxing Special Materials Technology Co.Ltd(002756) (49%) established Jiuli Yongxing alloy company to jointly develop high-quality special alloy materials and products. In the first half of 2021, the operating revenue of the alloy company was 236 million yuan and the net profit was 8.3 million yuan. The 5000 ton high-end deformed superalloy material industrialization project of the alloy company is expected to be put into operation in 2022, and its contribution to the company’s revenue and net profit will increase.
Profit forecast & investment suggestions
It is estimated that the net profit attributable to the parent company will be 783 million yuan, 904 million yuan and 1045 million yuan respectively in 21-23 years, and the EPS will be 0.8 yuan, 0.9 yuan and 1.1 yuan respectively, corresponding to 22 times, 19 times and 17 times of PE respectively. The valuation adopts PE method, giving the company 25 times PE in 22 years, corresponding to the market value of 22.6 billion yuan and the target price of 23 yuan. It is given a “buy” rating for the first time.
Risk tips
The implementation of raised investment projects does not meet expectations; Price fluctuation risk of raw materials; RMB exchange rate fluctuation risk, etc.
