This report is read as follows:
The company is a leading private oriented silicon steel enterprise in China. The barrier to entry of silicon steel industry is high, and the downstream power investment is exuberant, and the demand for silicon steel is booming. We expect the company's performance to be gradually released with the commissioning of the fundraising project.
Main points of investment:
Coverage for the first time, giving a "overweight" rating. We predict that the EPS of the company from 2022 to 2024 is 1.21111.58 yuan respectively, and the corresponding net profit is 3.02,4.02 and 527 million yuan respectively. With reference to similar companies, the company is valued at 36.15 times PE in 2022, corresponding to the target price of 32.9 yuan.
Coverage for the first time, giving the company an "overweight" rating.
Private oriented silicon steel leader, fund-raising projects bring high growth. The company's existing production capacity of oriented silicon steel is 100000 tons, and the output of oriented silicon steel ranks first among domestic private enterprises in 2021. The company has begun construction of 80,000 tons of high-grade oriented silicon steel project, which is expected to bring an increase of 20,000 tons, 30,000 tons and 30,000 tons respectively from 2023 to 2025. The company's oriented silicon steel output will increase steadily and its structure will be optimized. In addition, the fund-raising project will also bring an increase of 1500 box-type substations and 25000 sets of electrical equipment.
We expect the company's performance to be gradually released with the commissioning of the fundraising project.
The competition pattern of oriented silicon steel industry is good, and iron and steel enterprises have pricing advantages. From the process point of view, the production of oriented silicon steel needs accurate composition control of the whole process, precise temperature control to control the crystallization direction and so on. In 2020, the CR5 and CR10 of China's oriented silicon steel industry are 78.16% and 89.22% respectively, and the industry concentration continues to be high. In 2019, there are only 4 oriented silicon steel enterprises with a scale of more than 100000 tons, while there are more than 3000 downstream transformer enterprises. Iron and steel enterprises have pricing advantages and can be sustainable.
The demand is driven by power grid investment, and the demand for high-grade oriented silicon steel is growing faster. Oriented silicon steel is the most widely used alloy soft magnetic material at present, and the downstream power demand is mainly transformer and so on. Under the background of the high investment in power grid and the upgrading of energy efficiency of transformers during the 14th five-year Plan, we expect that the downstream demand of oriented silicon steel will continue to increase, and the demand growth rate of high-grade oriented silicon steel will exceed that of the industry.
Risk hint: the progress of the fund-raising project is not as expected; the risk of a sharp decline in grid investment.
