\u3000\u3000 Friend Co.Ltd(605050) (605050)
Investment logic
Third party steel logistics supply chain enterprises, rapid release of automobile sector processing capacity
Steel used in China’s automobile industry accounts for about 5% of the total steel consumption, and the steel consumption of China’s automobile industry will be 52.5 million tons in 2020. Steel sector accounts for more than 50% of automobile steel, and the steel consumption in automobile industry accounts for about 70% of the total weight of automobile. The pricing mode of automobile steel logistics is generally “base material price + comprehensive service fee”.
The company mainly provides complete steel logistics supply chain services for medium and high-end automobile, household appliances and other industries or their supporting manufacturers. The revenue of the downstream automobile steel industry accounts for 60%. According to the calculation, the company will account for about 7.5% of the market in the automobile steel industry in 2020, with significant advantages in the industry.
The company’s business model is “production based on sales”, implements a “many to many” supply chain system, and has nine processing centers. The processing capacity of automobile sectors is 1 million tons, and the new capacity of raised investment projects is 715000 tons. It has been put into operation successively in the first half of 2021, and the capacity is in a climbing period. In addition, the company plans to invest 300 million yuan to build a new energy vehicle sector processing project in Anhui, with a construction cycle of 18 months.
Relying on the advantages of industrial clusters, we will cut into the aluminum alloy die-casting track
Aluminum alloy is the most widely used lightweight material for automobile, which can reduce the weight of the whole vehicle by 30% – 40% instead of steel. The penetration rate of aluminum alloy die castings of power system is higher than 90%. Under the trend of lightweight and integrated die casting, the penetration rate of chassis and body is expected to increase year by year.
The company plans to invest 480 million yuan to build a new energy automobile aluminum die casting production base project in Anhui. With the help of upstream aluminum resources (strategic cooperative enterprise Shandong Nanshan Aluminium Co.Ltd(600219) ) and downstream customer resources, relying on the advantages of industrial clusters and customers, the company will cut into the aluminum die casting track. The construction period of the project is 24 months. The company has purchased three sets of die-casting islands and surrounding supporting equipment of 3500 tons, 4200 tons and 6200 tons respectively.
In July 2021, the company and Yawei jointly released the laser blanking technology. Its material utilization rate is more than 10% higher than that of stamping blanking, and there is no need for molds, the cost is reduced and flexible blanking production.
Profit forecast & investment suggestions
It is estimated that the net profit attributable to the parent company will be 338 million yuan, 430 million yuan and 530 million yuan respectively in 21-23 years, and the EPS will be 0.78 yuan, 0.99 yuan and 1.22 yuan respectively, corresponding to 18 times, 14 times and 12 times of PE respectively. The valuation adopts PE method, giving the company 17 times PE in 22 years, with a corresponding market value of 7.3 billion yuan and a target price of 17 yuan. It is given a “buy” rating for the first time.
Risk tips
Fluctuation risk of downstream industries; Price fluctuation risk of raw materials; Risk of shareholder reduction, etc.
