\u3000\u3000 Zhejiang Yongjin Metal Technology Co.Ltd(603995) (603995)
Event overview: on January 17, the company released the performance forecast for 2021: it is expected to achieve a net profit attributable to the parent company of RMB 575 million to RMB 615 million in 2021, with a year-on-year increase of + 38.74% to + 48.39%, and a net profit attributable to the parent company of RMB 550 million to RMB 590 million after deduction of non profits, with a year-on-year increase of + 45.17% to + 55.72%. According to the calculation, in 2021q4, the company realized a net profit attributable to the parent company of 139 million yuan to 179 million yuan, Q3 – 8.51% to + 17.86% month on month, 132 million yuan to 172 million yuan after deducting non net profit attributable to the parent company, Q3 – 10.23% to + 17.07% month on month.
Analysis and judgment:
The projects under construction were gradually put into operation, and the company’s output increased significantly. In 2019, the capacity of the company’s IPO project (75000 tons of ultra-thin precision stainless steel sector and strip project) was gradually released. The first phase of Zhejiang relocation project (125000 tons of precision cold rolled stainless steel production line project) was partially put into operation in the second half of 2021. The capacity of Guangdong Yongjin and qingtuoshangke was released at full capacity, and the company’s output increased significantly in 2021. In terms of price, the stainless steel price index in 2021 was + 27.17% year-on-year. The company adhered to the synchronous two-way locking mode to avoid the risk of price fluctuation in the raw material market and ensure the release of annual performance.
1 billion convertible bonds were successfully issued, and the 195000 ton ultra-thin precision stainless steel sector and belt project is expected to be put into operation by the end of 2022. In December 2021, the company successfully issued 1 billion yuan of convertible bonds, of which 195000 tons of ultra-thin precision stainless steel sector and belt project invested by raising funds has been started in July 2021, and 1 billion yuan of convertible bonds have been successfully issued, which effectively ensures that the project invested by raising funds will be gradually put into operation by the end of 2022.
The 700000 ton wide cold-rolled stainless steel sector and strip project in Indonesia will be arranged to speed up the development of overseas markets. On January 12, 2022, the company announced that it and Zhejiang Qingzhan Industrial Co., Ltd. jointly funded the establishment of Yongjin metal technology (Indonesia) Co., Ltd. (60% equity of the company) in Indonesia to build a 700000 ton wide cold-rolled stainless steel sector and strip processing project. This is after the company successively arranged stainless steel processing projects in Vietnam and Thailand, An important step in opening up overseas markets. The company will make full use of Indonesia’s superior stainless steel raw material conditions to accelerate the construction of overseas sales channels and improve the share of the international market. After the project is completed and put into operation, the company’s profitability is expected to be further enhanced.
Several projects are gradually put into operation and reach production capacity, and the performance release is just around the corner. Several projects of the company gradually release production capacity, and Jiangsu Yongjin IPO project is expected to reach production capacity after the Spring Festival in 2022. The 125000 ton relocation project of Zhejiang headquarters has been fully installed and commissioned and put into trial production by the end of November 2021. The 195000 ton convertible bond raised investment project has started construction and is expected to be put into operation by the end of 2022. The first production line of praseodymium saiseiko metal layered composite phase I project has been put into trial production at the end of December 2021, and the second production line is expected to reach production by the end of 2022. The 250000 ton precision stainless steel sector and belt project in Yongjin, Vietnam has entered the equipment installation stage. It is expected to be installed and put into trial production in March 2022. With several projects put into operation and reaching production, the scale effect will gradually appear, and the release of the company’s performance is just around the corner.
Investment suggestion: the company is the leader in the precision cold-rolled stainless steel sector and strip industry. With the gradual production and production of several projects, the company’s performance is expected to be further enhanced. We expect that the net profit attributable to the parent company from 2021 to 2023 will be RMB 601 / 751 / 1002 million in turn, corresponding to the closing price of RMB 57.23 on January 17, 2022, and the PE from 2021 to 2023 will be 22 / 18 / 13 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.
