Investment summary
Incident Overview
On April 26, the company released its 2021 report. In 2021, the company achieved operating income of 2,358 million yuan, an increase of 13.96% over the previous year, and the net profit of the mother was 111 million yuan, a decrease of 47.74% over the previous year.
The rise in prices of major raw materials affects profits. The company continued to increase marketing investment in 2021, and operating income increased 13.96% year-on-year; due to rising prices of major raw materials and increased competitive pressure in the market dragged down the company's profits, the company's gross margin in 2021 was 15.93%, down 7.56 pct from the same period in 2020. The gross margins of PVC, PPR, and PE were 14.25%/31.78%/13.79% respectively, down 8.45pct/1.46pct/5.99pct from the same period last year.
Yunnan Xiongsu was completed and put into operation, and additional investment projects are planned to expand production capacity. The company currently has an annual production capacity of around 470,000 tons. It has six major production bases including Guangdong, Guangxi, Henan, and Jiangxi. The project with an annual output of 70,000 tons in Yunnan was completed and put into operation at the end of 2021, meeting the company's strategic requirements to build on the southwest market and advance into Southeast Asia. Guangdong Xiongsu and Guangxi Xiongsu plan to add new investment projects, focusing on expanding production capacity in municipal pipelines and improving the company's business carrying capacity.
Aiming at new opportunities for municipal construction, developing new products to meet a variety of application scenarios. The company has increased investment in municipal pipeline research and development to expand the range of municipal pipeline products. Currently, it has developed a variety of PE series pipes, and the products can be used in various application scenarios in municipal engineering business. The company set up a direct sales department to mainly serve municipal engineering business, focusing on key customers and core business areas.
Investment advice
Aiming at new opportunities for municipal construction, the company increased investment in municipal pipeline business, and progressed steadily with the acquisition of Kangtai Group. Revenue for 2022-2024 is expected to be 26.65/30.82/3413 billion yuan, up 13%/15.7%/10.7% year on year; Guimu's net profit was 191/253/301 million yuan respectively, up 72.1%/32.5%/18.9% year on year. EPS was 0.53/0.71/0.84 yuan/share, corresponding to the April 28 stock price, PE was 15X/11X/9X respectively, maintaining the “buy” rating.
Risk warning
Production capacity expansion fell short of expectations; major asset restructuring fell short of expectations; there was a risk that raw material prices would rise sharply.