Event: the company released its semi-annual report of 2022, with revenue of 1.647 billion yuan in the first half of the year, an increase of 5.61% over the same period last year, a net profit of 63 million yuan, an increase of 41.57%, and a deduction of 13 million yuan from non-net profit, a decrease of 70.34% over the same period last year.
Copper processing gross profit margin leading peers, capacity relocation affects short-term capacity. 1) the gross profit margin of the main copper processing business remains at a high level: the income of 22H1 copper processing business is 1.54 billion yuan, the gross profit is 175 million yuan, and the gross profit margin is 11.33%, which is 0.5 pct lower than that of 21H2, and is still at the leading level in the industry (the gross profit margin of A-share listed companies in the same industry is mostly less than 10%). 2) the relocation of 15000 tons of Xingu River capacity affects short-term production capacity and profits: Xingu River, a subsidiary, was relocated from November 2021 to May 2022, during which the production capacity of high-end copper processing products was affected to a certain extent, and the asset disposal income of 63.2667 million yuan was confirmed in the current period. Xingu River takes this relocation as an opportunity to maintain and update the original equipment, and the subsequent rapid recovery of production capacity will further improve product quality.
Expand and strengthen the main industry of high-end copper processing, multi-project expansion is about to land. Since 2018, the company has taken the initiative to divest film and television assets and eliminate low-end production lines. At present, it has a production capacity of 50,000 tons of high-precision copper plate and strip. The products are mainly used for connectors in areas such as new energy & 5G, and the demand is expected to maintain a high economy. The construction capacity includes Guangxi Xinke 20,000 ton high-end electronic copper strip project, Tongling Xinke 10,000 ton tinned strip project, Jiangxi Xinke 18000 ton high-end electronic copper strip project, of which the progress of Guangxi Xinke project has reached 53%. At that time, the company will form a production capacity of nearly 100000 tons of high-precision copper plate and strip, double the existing production capacity.
Sichuan Rongxin, a state-owned shareholder, will be given a controlling stake to fully subscribe for the non-public offering of aluminum-based batteries. Sichuan Rongxin holding, a state-owned asset in Santai County, Mianyang City, Sichuan Province, will transfer 177 million shares held by Chuanshan Culture, a major shareholder, and subscribe for 510 million non-public offering shares of the company, raising net funds to invest in the construction of an aluminum-based battery industry park (2GWh) project in Santai County. After completion, Sichuan Rongxin is expected to hold 29.72% of the company and become the company's controlling shareholder. According to the announcement, the new aluminum-based battery uses aluminum-carbon composite negative electrode instead of graphite negative electrode, which has the characteristics of wide temperature range, low cost, long life and high safety, and can be used in small power, consumption, power tools, energy storage and other fields. has passed the downstream customer inspection and certification, with the basis of large-scale production. After the completion of the project, the company will form a two-wing development pattern of copper processing industry and new energy industry.
Profit forecast and investment advice: taking into account the use of copper strip for connectors or to maintain a high economy, the estimated net profit of home ownership in 2022-2024 is 1.22 million, 2.10 million, 268 million, the first time to cover the "overweight" rating.
Risk tips: downstream demand is lower than expected, product prices fluctuate, and projects under construction are not as expected.