The company released its semi-annual report for 2022: in the first half of 2022, the company achieved revenue of 38.105 billion yuan, an increase of 14.9% over the previous year; net profit of 651 million yuan, an increase of 4.7% over the previous year; net profit of non-attributable net profit of 563 million yuan, an increase of 18.9% over the previous year. At 2022Q2, the company achieved revenue of 19.532 billion yuan, up 11.2% year on year and 5.2% month on month; net profit of 339 million yuan, down 3.3% year on year and 8.6% month on month; net profit of non-return net profit of 332 million yuan, up 12.9% year on year and 43.8% month on month. The results fell slightly short of our expectations.
The recovery in copper processing costs is driving the increase in profit per ton. Volume: The company's 202H1 achieved sales volume of 464,400 tons of copper and copper alloys, a year-on-year decrease of 3.16%; Price: The average price of the company's 202H1 copper products per ton without tax was 58,000 yuan/ton, an increase of 18.92% over the previous year, mainly driven by rising copper prices and rising processing fees. Costs:
The cost per ton of the company's 202H1 copper product was 54,800 yuan/ton, an increase of 18.04% over the previous year. The increase was slightly less than the price growth rate, reflecting a certain recovery in processing fee levels, increasing the company's gross profit level. Profit per ton: The company's gross profit per ton of H1 copper products in 2022 was 3,252 yuan, up 35.95% year on year; gross margin was 5.61%, up 0.71 pct year on year. Looking at gross margin by product, the gross profit performance of the copper tube and copper rod business was excellent. The gross margin increased by 0.61 and 1.72 pct to 5.55% and 7.10%, respectively, over the same period last year.
On a quarterly basis, exchange losses dragged down profit performance. 2022Q2's net profit increased by 26.73 million yuan month-on-month and decreased by 1.52 million yuan year-on-year. The month-on-month increase in net profit mainly comes from gross profit (+295 million yuan). Since air conditioning customers face the peak sales season in Q3 and need to prepare goods in advance in Q2, Q2 is the traditional peak season for copper tube companies. Production and sales may have increased somewhat compared to Q1, but this year, facing the operating pressure brought about by the pandemic and the global economic downturn, the company's Q2 growth rate was lower than last year. Interest reductions in month-on-month results were mainly due to expenses and taxes (-247 million yuan) and investment income (-34 million yuan). The company's financial expenses increased 82.47% year-on-year to 307 million yuan due to exchange losses in export business, resulting in weaker net profit performance than revenue performance.
Core highlights: ① Production line transformation continues, and copper tube production capacity continues to expand. By the end of 2024, the company will use the fifth-generation continuous casting and continuous rolling process to eliminate, renovate and upgrade the old production line in batches. It is estimated that the company's precision copper tube production capacity will increase from 798,000 tons in 2021 to 1.31 million tons in 2024, with a CAGR of 18%. ② The implementation and commissioning progress of the copper foil project has exceeded expectations. The copper foil project achieved successful trial production of 6 μm and 8 μm products on June 14, 2022. The 4.5 μm copper foil product has achieved a breakthrough in technology, and preparations for trial production have begun. The sample delivery customer's intended order has exceeded the trial production capacity. It is expected that the construction of 6 production lines will be completed in September, with a total annual production capacity of 12,500 tons; the construction of 12 production lines will be completed by the end of the year, at which time the total annual production capacity will reach 25,000 tons.
Investment suggestions: As the competitive landscape improves, product processing costs rise, the company's profit per ton of products gradually rises, superimposed production capacity continues to expand, and the volume and price of the company's products have risen sharply. At the same time, the company has entered the copper foil track and is expected to draw a second growth curve. Considering the impact of the epidemic on production and sales throughout the year, we lowered our performance forecast. We expect the company to achieve net profit of 1,387, 19.78, and 2,573 billion yuan in 2022-2024. EPS is 0.71, 1.01, and 1.31 yuan respectively. PE corresponding to the closing price on August 30 is 16x, 12x, and 9x, maintaining the “recommended” rating.
Risk warning: Fluctuations in raw material prices, falling processing costs, project commissioning falling short of expectations, etc.
