Summary of the report
"specializing in special new" professional oil special management enterprises. Dalip Holdings is a leading private professional oil pipe and seamless steel pipe manufacturer in China. The company has the characteristics of "specialization and innovation", intelligent and green production facilities, API system certification and ISO9001 quality system certification, etc., and provides customers with professional oil pipe and special seamless steel pipe products adapted to different downhole environments, with customized production capacity. The company's R & D center is strong, holds about 50 product-related patents, and has a strong testing capability. The company's high-end products, such as DLP-T4, have won a large order for the Petrochina Company Limited shale gas project and successfully entered the shale gas market.
The whole industry chain model, good customer cooperation relationship. Dalip Holdings realizes the layout of the whole industry chain, with products covering tube blanks, special seamless steel tubes and casings, achieving the best economic benefits while achieving good quality control and customer demand response. After more than 20 years of development, the company has obvious first-mover advantages. It is a registered supplier of China's "three major" oil companies and has a cooperative relationship with core customers for 20 years. The product quality has been recognized by customers and has a good customer base.
The company's capacity expansion is about to start, entering a period of rapid growth. At present, the annual production capacity of tube billet, special seamless steel pipe and casing in Dalip holding production base of Cangzhou City, Hebei Province is 600000 tons, 550000 tons and 300000 tons respectively. The second and third phases of capacity expansion are about to begin, which will start in the middle of this year and next year, respectively, and will be completed in the middle of next year and the end of next year. After reaching production, the annual production capacity of tube billet, special seamless steel pipe and casing reaches 1.4 million tons, 1.25 million tons and 600000 tons respectively, and the annual production capacity contribution is realized for the first time in 2024. According to the plan, the production capacity CAGR of the company's casing, special seamless steel pipe and tube billet will reach 26%, 31% and 33% respectively in 2021-24. We expect that the rapid expansion of production capacity will push the company's performance into a period of rapid growth.
We covered for the first time, giving a "buy" rating, with a target price of HK $4.16. We forecast that the revenue of Dalip Holdings in 2021-23 will be 3.04 billion RMB, 3.22 billion RMB and 3.67 billion RMB respectively, and the income CAGR of 2020-2023E will be 17.5%. The net profit is 100 million, 180 million and 210 million yuan respectively, and the net profit CAGR of 2021-2023E is 45%. The company expects to maintain a 40% dividend. We believe that the company is about to enter a period of rapid growth driven by capacity expansion, and the valuation of the DCF model is more reasonable to reflect the company's medium-term performance growth. The company estimates a reasonable market capitalization of HK $6.28 billion and a corresponding share price of HK $4.16. For the first time, we have a "buy" rating with a target price of HK $4.16, corresponding to 23.8 times forecast earnings in 2023.
Risk tips: oil prices fluctuate sharply; scrap metal prices rise rapidly; the company's production expansion plan is slower than expected.