\u3000\u3000 Citic Pacific Special Steel Group Co.Ltd(000708) (000708)
Event overview: on January 14, the company issued a performance express: it is expected to realize a net profit attributable to the parent company of RMB 7.952 billion in 2021, a year-on-year increase of + 31.82%, and a net profit attributable to the parent company of RMB 7.816 billion after deduction of non profits, a year-on-year increase of + 33.58%. According to the calculation, the net profit attributable to the parent company of 2021q4 is RMB 1.89 billion, with a month on month increase of Q3 + 0.86%; Deduct the net profit not attributable to the parent company of RMB 1.837 billion, a month on month increase of Q3 + 0.04%.
Analysis and judgment:
The company actively optimizes the product structure, effectively alleviates the impact of raw material price fluctuation and “dual control of energy consumption” policy. In 2021, the price of raw materials increased significantly, including the average price of scrap steel + 29.9%, the average price of iron ore + 46.5% and the average price of coke + 46.1% year-on-year. The superposition of policies such as “double carbon” and “double control of energy consumption” affected the steel output, and the business environment faced by the company was poor. In this context, the company actively optimized the product structure, among which the “three high and one special” products maintained rapid growth, and the production and sales of superalloys in the first three quarters exceeded the annual level in 2020. In addition, the company took many measures to reduce costs and increase efficiency, effectively control the growth of costs and expenses, and boost the stable release of annual performance.
The issuance of 5 billion convertible bonds has been approved by the CSRC, and the layout of high-end products is expected to accelerate. On December 30, 2021, the company announced that the CSRC approved the company to publicly issue convertible corporate bonds with a total face value of 5 billion yuan. The raised funds are mainly invested in the “three high and one special” and other projects mainly developed by the company, of which the “three high and one special” product capacity is planned to be 39000 tons in the special metallurgical forging product upgrading and transformation project (phase II), and the “three high and one special” product capacity is planned to be 52000 tons in the special metallurgical forging product upgrading and transformation project (phase III). Under the background of accelerated import substitution of high-end steel materials in aerospace, energy and other fields, the development space of high-end product projects planned by the company is broad.
The company’s production and sales of special steel for automobile continued to grow. The automotive steel produced by the company is mainly used in the engine, gearbox, steering system, transmission system, braking system and other key core parts of medium and high-end vehicles, and the product quality and stability have reached the world-class level. Since 2021, the company’s sales volume of automotive steel has continued to grow. The sales volume from January to September 2021 has exceeded that of 2020. The company’s automotive steel has passed the certification of Mercedes Benz, BMW, Audi, SAIC, FAW, Nissan and Toyota and has been supplied in batches, and has been applied to Tesla, SAIC, Byd Company Limited(002594) , Nissan and other new energy vehicle fields, In the future, the company will focus on the growth demand of medium and high-end vehicles and new energy vehicles for special steel materials, and the contribution of automotive steel to the company’s performance is expected to continue to increase.
The scale synergy of seamless steel pipe sector can be expected. In February 2021, the company won 40% equity of Shanghai Electric Group Company Limited(601727) Group Steel Pipe Co., Ltd. from Shanghai Electric Group Company Limited(601727) Group Co., Ltd., and its core asset is the production capacity of 3.5 million tons of seamless steel pipe of Tianjin Steel Pipe Manufacturing Co., Ltd. The company sent a management team of more than 30 people to Tianjin steel pipe to fully participate in the production, operation and management. At present, the company’s manageable and collaborative seamless steel pipe production capacity has reached 5 million tons, leading the scale in the world, and the scale synergy effect can be expected in the future.
Investment suggestion: the company is the world’s leading professional special steel material manufacturing enterprise. With the gradual operation of the “three high and one special” upgrading project in the future, the company’s performance can be released. We expect that the net profit attributable to the parent company from 2021 to 2023 will be RMB 79.53/92.59/10.934 billion in turn, corresponding to the closing price of RMB 22.48 on January 14, 2022. The PE from 2021 to 2023 will be 14 / 12 / 10 times in turn. The company will be given a “recommended” rating for the first time.
Risk tips: the downstream demand is less than expected, the price rise of raw materials is more than expected, and the project progress is less than expected.
