Event: the company released its first quarterly report for 2022. 2022Q1 achieved an operating income of 5.232 billion, an increase of 29.46% over the same period last year, and a net profit of 540 million, an increase of-2.08% over the same period last year.
Comments:
Profit resilience leads the industry, and gross profit margin remains high. 2022Q1's parent net profit fell 2% year-on-year and 8% month-on-month, but compared with the performance of the steel industry, the company led the industry in terms of profitability and resilience, and the company's gross profit margin remained at more than 15%, far exceeding the industry average.
The management advantage is obvious, the equity incentive rebuilds the vitality. Under the differential core cost strategy, Fangda Special Steel can improve labor productivity and reduce the total internal cost by controlling low labor, depreciation, energy, manufacturing expenses and other non-raw material costs. According to the newly disclosed 2021 annual report, the ROE of Fangda Special Steel reached 28.9% in 2021, and it has been in an industry-leading position in the decade from 2011 to 2020, and basically maintained a high ROE status of more than 20%. In addition, Fangda Special Steel has launched three equity incentive plans since its listing, including a stock option plan in 2012 and 2017 and a restricted stock incentive plan in 2021.
High dividend, a model of value investment. Fangda Special Steel has maintained a high dividend frequency and high dividend yield for many years, which has brought a high return on investment to investors. From 2020 to 2021, the dividend payout rate of Fangda Special Steel Company is as high as 110% and 88%, and the dividend yield is 15.9% and 14.2% respectively. Such a high dividend yield is also rare in the industry.
The external body is huge, pay attention to the follow-up asset injection. Fangda Iron and Steel Group, the controlling shareholder of the listed company, will participate in the acquisition of Pinggang shares as a transition, and promise to succeed in the acquisition, and then inject Fangda Special Steel through transfer or other means when the time is ripe. Pinggang shares as one of the three major iron and steel mills in Jiangxi, the future injection of the company will still give the company growth.
Iron and steel industry: supply and demand improvement under reduced production. The regular meeting of the National Development and Reform Commission said that production reduction will continue in 2022; at present, it seems that flat control is the bottom line, and it is more likely to continue to reduce production. After the relief of the epidemic, steel will usher in a triple rebound of seasonal and delayed export demand at the beginning of the year, and steel demand is expected to grow by 1-2% for the whole year; steel fundamentals are expected to usher in a situation of rising steel prices and increased profits.
Profit forecast and investment rating: we forecast that the company's income from 2022 to 2024 will be 23924000000000000000 respectively, with a year-on-year growth rate of 10% 2022Q1 1% / 1% respectively. Based on the company's 2022Q1 profit, we maintain the company's homed net profit of RMB 100 million in 2022-2024, compared with 14%, 4% and 3%, respectively, and the corresponding PE is 5.8, 5.6 and 5.4x, respectively. Considering that the company's valuation is historically low, ROE is significantly higher than that of its peers and profitability is strong, so the company's "buy" rating is maintained.
Risk tips: demand is lower than expected, raw material prices fluctuate, and the company's own operating risk.