occurrences
Tongyu Heavy Industries released its 2021 annual report and the report for the first quarter of 2022: it achieved revenue of 5.749 billion yuan in 2021, up 1.07% from the previous year; achieved gross profit of 1,003 million yuan, a decrease of 25.81% over the previous year; and achieved net profit attributable to the parent company of 285 million yuan, a year-on-year decrease of 25.36%. The first quarter of 2022 achieved revenue of 1,347 million yuan, a year-on-year decrease of 8.38%; achieved gross profit of 189 million yuan, a year-on-year decrease of 34.93%; and achieved net profit attributable to the parent company of 52 million yuan, a year-on-year decrease of 48.20%.
reviews
Revenue and profit growth and gross margin in 2021 fell short of our expectations of achieving operating income of 5.749 billion yuan for the full year of 2021, up 1.07% year on year; achieved gross profit of 1,003 million yuan, down 25.81% year on year; and realized net profit attributable to parent company was 285 million yuan, down 25.36% year on year. The consolidated gross profit margin was 17.45% for the full year, a decrease of 6.33 percentage points compared to the full year of 2020, and an increase of 2.683.38 percentage points compared to the fourth quarter of 2021.
The growth rate of the company's revenue and net profit in 2021 was lower than our expectations, mainly because the actual downstream lifting volume was significantly lower than expected, and mainly offshore wind power orders. The company was constrained by the product structure, and the revenue growth rate was lower than the industry average. The overall gross margin was far lower than expected, mainly due to the impact of rising raw material prices and the quarterly decline in gross margin for related orders in '21 far exceeding expectations. Moreover, the company's original inventory level in '21 was low, and the price increase of raw materials far exceeded expectations, which had a big impact on the company's gross margin.
The company's operations continued to fall short of expectations in the first quarter of 2022, but gross margin is expected to bottom out with revenue of 1,347 million yuan in the first quarter of 2022, down 8.38% year on year; gross profit of 189 million yuan, down 34.93% year on year; and net profit attributable to parent company 52 million yuan, down 48.20% year on year. Achieved a consolidated gross profit margin of 14.11%, a decrease of 5.76 percentage points compared to the first quarter of 2021, a decrease of 3.34 percentage points compared to the full year of 2021, and a decrease of 0.67 percentage points compared to the fourth quarter of 2021.
The company's revenue and profit growth rate and gross margin for the first quarter were lower than our expectations. The main thing is that the first quarter of '22 was still executing and absorbing low-priced orders from '21, but the month-on-month decline in the company's gross margin in the first quarter has abated. The price level and gross margin level of the company's new orders have recently bottomed out, and the company's inventory is also more fully prepared. The gross margin for the first quarter is likely to be an inflection point. The gross margin for wind power spindles and castings will all begin to recover. It is expected that the gross margin for revenue settlement will rise markedly in the future.
Profit forecasts
The company's full-year performance in 2021 fell short of our forecasts, and the results for the first quarter of '22 fell far short of our expectations, mainly because the first quarter of '22 continued to absorb related forging and casting orders with low gross margins in '21. However, the current impact of the national epidemic control in the second quarter of '22 is significant, and it remains to be seen whether the forging spindles and wind power casting business will flourish as expected in the second quarter.
We carefully considered adjusting the corresponding forecast model based on the company's 2021 annual report and data for the first quarter of '22.
We expect that in 2022-2024, the company will achieve operating income of 6459, 7.325 and 8.411 billion yuan, net profit of 365, 452 and 560 million yuan of the parent company, and a total share capital of 3,8897 million shares, corresponding to EPS 0.37, 0.46 and 0.57 yuan. On April 29, 2022, the stock price was 2.45 yuan, corresponding to a market value of 9.5 billion yuan. The 2022-2024 PE was about 26, 21, and 17 times.
The determination of the national carbon neutrality strategy has changed the expectations for the total volume of the wind power industry over the next 3-5 years. We believe that the period for the wind power industry to return to normal after the rush is over in 2021 will be prolonged. Taken together, we believe that the company's 21 low-price orders have basically been digested, and corresponding preparations have been made for the increase in raw material prices. The gross margin of the core business is expected to bottom out and improve. In summary, we maintain the company's “increase” rating.
Risk warning: Macroeconomics is lower than expected, industry competition is intensifying, and wind power business growth is lower than expected.