Pay attention to the investment opportunities of pipeline products brought by the national water network and underground pipe network. Since December 2021, the state has intensively issued relevant policies on the construction of underground pipe network and water conservancy projects. The national water network and underground pipe network are expected to become one of the key directions of infrastructure development, driving the substantial growth of pipeline demand. In 2013, nodular cast iron pipes accounted for 33.85%, gray cast iron pipes 18.43%, plastic pipes 30.65%, steel pipes 9.81%, prestressed steel cylinder concrete pipes 5.88% and cement pipes 1.37% of China's public water supply pipelines.
Plastic pipes are mainly used in the field of small-diameter water supply pipes and building pipes. According to the Tenth Five Year Plan of the national chemical building materials industry and the outline of the 2010 development plan formulated by the state, plastic pipes will be mainly used for building water supply, hot water supply and heating pipes, rainwater drainage pipes and urban water supply pipes with an outer diameter of less than 400mm in the future. Taking Chancheng District, Foshan City as an example, by the end of 2019, the length of plastic pipe in the pipe network accounted for only 8.4%. Due to its limited compressive capacity, it is mainly used in pipes with an outer diameter of less than 300mm.
Metal pipes account for the highest proportion in urban public water supply pipelines. Metal pipe is the most common pipe in urban water supply system. According to our prediction, the proportion of construction industry and water industry in the downstream of steel pipe is 51%, while nearly 80% of the downstream of nodular cast pipe is municipal construction and water network. The laying length of nodular cast iron pipe exceeded that of steel pipe in 2003 and that of gray cast iron pipe in 2008; In 2013, the laying length of metal pipes in urban public water supply system accounted for 62%. From 2003 to 2013, nodular cast iron accounted for an average of about 50% of the laying length of new urban public water supply pipelines over the years, indicating that it is gradually replacing steel pipes and gray cast iron pipes.
The price and processing cost of centrifugal nodular cast pipe are at a high level since 2011. As of January 14, 2022, the price of centrifugal nodular cast pipe was 7100 yuan / ton, and the price difference between centrifugal nodular cast pipe and nodular cast iron reached 2800 yuan / ton, both at the highest level since 2011, indicating that the downstream demand of centrifugal nodular cast pipe is good at present; Welded steel pipe and seamless steel pipe fell slightly after reaching the highest level since 2012 in May 2021. As of January 14, 2022, the spot price difference of welded steel pipe and hot rolled strip was 286 yuan / ton, which was at a high level since 2010, while the price difference of seamless steel pipe and billet was 537 yuan / ton, slightly lower than the historical average level (579 yuan / ton).
Centrifugal nodular cast pipe is superior to steel pipe in terms of profit, competition pattern and potential demand space. Centrifugal nodular cast pipe industry has high technical barriers and stable competition pattern. In 2020, the gross profit margin of nodular cast pipe products represented by Xinxing Ductile Iron Pipes Co.Ltd(000778) will exceed 20%, much higher than Jiangsu Changbao Steeltube Co.Ltd(002478) (17.17%), Tianjin You Fa Steel Pipe Group Stock Co.Ltd(601686) (4.78%) and Zhejiang Kingland Pipeline And Technologies Co.Ltd(002443) (8.25%); As of 2013, centrifugal ductile iron pipes accounted for about 34% of China's urban water supply pipelines, while in other developed countries, such as Japan, the proportion could reach 93%, indicating a large potential demand space.
Investment suggestion: nodular cast pipe will benefit more from the construction of national water network and underground pipe network. The construction of national water network and underground pipe network is expected to become one of the key directions of infrastructure development, which is expected to drive a substantial increase in the demand of the pipeline industry. Steel pipes and centrifugal nodular cast pipes are the most common pipes in the water supply system, and the processing cost of centrifugal nodular cast pipes and welded pipes is at a historical high level. It is suggested to pay attention to the following subjects: Xinxing Ductile Iron Pipes Co.Ltd(000778) , Tianjin You Fa Steel Pipe Group Stock Co.Ltd(601686) , Zhejiang Kingland Pipeline And Technologies Co.Ltd(002443) , Jiangsu Changbao Steeltube Co.Ltd(002478) .
Risk analysis: the construction of national water network and underground pipe network is not as expected; The supply of metal pipeline industry exceeds the demand.
