Performance review
The company's annual results are in line with our expectations.
The company disclosed the 2021 annual report, revenue 113.85 billion yuan, year-on-year + 39.5%, return to the mother net profit 5.33 billion yuan, year-on-year + 168.9%, deducted non-return net profit 5.41 billion yuan, year-on-year + 264.3%. The revenue of 4Q in a single quarter was 28.04 billion yuan, + 19.8% compared with the same period last year, and the net profit returned to the mother was about-1.19 billion yuan, which was-380.9% compared with the same period last year, in line with expectations.
1) production and sales reached an all-time high, and the profitability of steel was significantly improved. The annual steel production and sales volume of the company is 20,052,052 million tons, respectively, compared with the same period last year. The year-on-year net profit per ton of steel is estimated to be 4923ppm 260 yuan per ton steel selling price / ton steel gross margin / ton steel net profit respectively, and 160yuan / ton per ton of plate / strip / wire rod / train wheel axle steel per ton, respectively, compared with the same period last year.
2) continuous improvement of operation and management ability and optimization of operating cash flow. The company's annual per ton steel amortization / ton steel fee is 1571,113 yuan per ton, respectively, compared with the same period last year. The annual per capita crude steel output of the company is 1120 tons, which is + 18.2% compared with the same period last year. At the end of 2021, the company's asset-liability ratio was 59.0%, year-on-year-0.6ppt. The company's net operating cash flow in 2021 was 16.774 billion yuan, + 14.004 billion yuan compared with the same period last year, mainly due to the increase in cash received from the sale of goods and services.
Trend of development
The leading steel company in East China, which is both offensive and defensive, is optimistic about the company's 2Q valuation repair. The company's main iron and steel production capacity relies on the Yangtze River Delta region with developed manufacturing and strong steel demand, and can enjoy the steel premium brought by the good supply and demand pattern in the region. We have observed that there are obvious signs of infrastructure development in the Yangtze River Delta region under the background of steady growth, but the overall impact of the recent epidemic on the company's production, operation and terminal demand is limited, and the regional demand in East China is expected to take the lead to pick up, driving steel prices and company profits to rise further. In addition, the conflict between Russia and Ukraine has led to a gap between supply and demand in the European Union, superimposed by the rise in overseas energy prices, which has pushed up steel prices at home and abroad, and the company's plate exports may exceed expectations. We are optimistic that the resonance of internal and external demand will bring the company high profitability.
After joining Baowu, the management continues to improve, and is optimistic about the medium-and long-term development of the company. We have observed that the operation and management of the company has continued to improve after joining Baowu, and the expense rate continues to decline while production efficiency rises. we are optimistic that the company's medium-and long-term profitability will improve steadily with the improvement of operating efficiency.
Profit forecast and valuation
We keep the 22e/23e EPS 0.98 pound unchanged at 0.86 yuan, and the current stock price of 22e/23e4.0x/4.6x 2.6x/3.0x H corresponds to that of 22e/23e4.0x/4.6x Pamp E and 2.6x/3.0x P amp E. We maintain the industry rating of 22e/23e 6.1x/7.0x H shares outperforming the industry and keep the target price of A / H shares unchanged at HK $6 / HK $4. We correspond to both 3.5x/3.9x P and E, implying 51% and 33% upside space for A / H shares.
Risk.
The pressure of raw material cost is higher than expected, and the real estate boom is declining more than expected.