Event

Tongyu heavy Industry released its mid-2021 report that in mid-2021, operating income reached 2.873 billion yuan, up 15.14 percent from the same period last year; gross profit was 558 million yuan, down 11.98 percent from the same period last year; and net profit attributed to the parent company was 202 million yuan, an increase of 10.18 percent over the same period last year.

Comment

The company's mid-term performance in 2021 is basically in line with our expectations. Thanks to the national carbon neutralization strategy, the space of the wind power industry is expected to exceed expectations, and the total growth rate of the industry is expected to continue.

Tongyu heavy Industry released its mid-2021 report that in mid-2021, operating income reached 2.873 billion yuan, up 15.14 percent from the same period last year; gross profit was 558 million yuan, down 11.98 percent from the same period last year; and net profit attributed to the parent company was 202 million yuan, an increase of 10.18 percent over the same period last year. The comprehensive gross profit margin was 19.42%, 0.41% lower than the first quarter of 2021 and 4.36% lower than that of 2020. The company's medium-term performance is basically in line with our expectations.

From April to June 2021, the operating income was 1.403 billion yuan, up 5.35% from the same period last year; the gross profit was 266 million yuan, down 31.97% from the same period last year; and the net profit belonging to the parent company was 102 million yuan, down 16.18% from the same period last year. The negative year-on-year growth of gross profit and net profit in the second quarter is mainly due to the impact of the downward price of mainframe and the rising price of upstream raw materials. Compared with the first quarter of 2021, the year-on-year growth rate of revenue and gross margin also declined significantly, which we believe is mainly due to the fact that the installation and hoisting volume in the first half of the year was significantly lower than expected. The company's casting business performance in the first half of 2021 is basically in line with our expectations, metallurgy, nuclear power and pipe mold business performance exceeded our expectations. In terms of forging business, the company strives to tap its potential and increase the development and income of forgings in other industries.

Profit forecast

We appropriately adjust the profit forecast according to the China News, and it is estimated that the company will achieve operating income of 63.92,74.04 and 9.143 billion yuan in 2021-2023, net profit of 4.41,5.14 and 649 million yuan vested in the parent company, and total equity of 3.897 billion shares, corresponding to 0.11,0.13 and 0.17 yuan of EPS. On August 13, 2021, the stock price was 3.79 yuan, corresponding to a market capitalization of 14.7 billion yuan, and the PE from 2021 to 2023 was about 34, 29 and 23 times.

The determination of the national carbon neutralization strategy has changed the expectation of the total amount of the wind power industry in the next 3-5 years, and we believe that the time for the wind power industry to return to normal after rush installation in 2021 will be lengthened. On the whole, we believe that the implementation of the company's strategy of tapping potential and increasing income and strengthening management in the first half of the year is better. In the second half of the year, due to the pressure of the assessment task of new energy state-owned enterprises, the hoisting situation of domestic wind power will improve month on month. We believe that the company's performance in the third quarter is expected to improve. To sum up, we maintain the company's "overweight" rating.

Risk hints: the macro-economy is lower than expected, the industry competition is intensified, and the volume of new products is lower than expected.