\u3000\u3000 Xinxing Ductile Iron Pipes Co.Ltd(000778) (000778)
Key investment points
Xinxing Ductile Iron Pipes Co.Ltd(000778) is an integrated enterprise of iron and steel smelting, rolling and processing, and nodular cast iron pipe is the core product
The 2672 engineering headquarters of the Chinese people’s Liberation Army, founded in 1971, is the core enterprise of the emerging Jihua Group Corporation Limited(601718) of central enterprises. In 1993, it produced the first centrifugal ball milling cast pipe, breaking the international monopoly. The company has an efficient production process from steel smelting to processing in the upstream. At the same time, it produces ordinary steel, special steel and core products ductile iron pipes. Some cast pipe products are further processed into pipe fittings and castings. At present, it has a steel production capacity of 5 million tons and 3.2 million tons of cast pipes and pipe casting products, which are mainly used in the fields of water supply, water supply, drainage, industrial and mining water, seawater desalination, sewage and heat supply.
The nodular cast pipe industry is highly concentrated. In terms of technology, production capacity and output, the company is the global leader in nodular cast pipe
In terms of production and marketing, the company has formed a production capacity layout of ductile iron pipes covering major regions outside China, including Hebei, Shanxi, Anhui, Hubei, Sichuan, Xinjiang, Guangdong and other places; The sales network covers Asia, Europe, Africa and America, and the products are exported to more than 120 countries in the world. In terms of technology, the company’s key technology and equipment of centrifugal nodular cast iron pipe won the Chinese Patent Gold Award. The company is the main drafting unit of national standards of centrifugal nodular cast iron pipe, presided over and participated in the preparation and revision of 30 standards, and entered the core circle of international standardization in the field of cast pipe through leading the preparation and revision of iso10804, iso8180, iso21052 and other international standards. At present, with a casting capacity of 3.2 million tons, the company is the largest nodular cast iron pipe manufacturer in China, far higher than other competitors in the same industry in China, and is also in a leading position in the world.
The steady growth direction has been determined in 2022, and the downstream demand of nodular cast pipe is expected to burst
Nodular cast iron pipe is widely used in the fields of water supply, gas supply, drainage and sewage in municipal and water conservancy projects because of its advantages of good toughness, high strength, corrosion resistance, convenient construction and high cost performance. The central economic work conference has set the tone that next year’s economy will focus on stability. We should moderately advance infrastructure investment, and support the construction of water conservancy, municipal and new infrastructure is an important starting point for steady growth. Water conservancy projects are expected to accelerate; At present, the leakage rate of urban pipe network in China is 13.39%, and the renewal of old water supply pipelines is expected to release new pipeline demand; With the development of new rural construction, the scale of municipal pipe network will also increase significantly. Under the background of “stabilizing the economy”, nodular cast pipe is expected to accelerate the release of demand again, which will open a new business cycle of the industry.
Profit forecast and valuation
It is estimated that the company’s operating revenue from 2021 to 2023 will be RMB 50.9 billion, 53.5 billion and 55.6 billion, with a year-on-year increase of 18.50%, 5.11% and 3.86%, and the net profit attributable to the parent company will be RMB 2.231 billion, 3.613 billion and 4.228 billion, with a year-on-year increase of 23.12%, 61.93% and 17.01%, corresponding to EPS of RMB 0.56, 0.91 and 1.06. The current price corresponding to PE is 8.80, 5.43 and 4.64 times. As an absolute leading enterprise in China’s cast pipe industry, the company will fully enjoy the dividends of the rapid development of the pipeline industry in the future. Considering the leading position of Xinxing Ductile Iron Pipes Co.Ltd(000778) in its own track and the optimization space of the company’s product structure, the company is given a price earnings ratio of 10 times in 2022. For the first time, give a “buy” rating.
Risk tip: the implementation of the policy is less than expected, the price of upstream raw materials rises sharply, and the environmental protection policy is tightened.
