Main points of investment:
The company is the largest heavy machinery manufacturer in China. The company is located in the world's top large casting and forging manufacturers and equipment suppliers. In the past 11 years, the sales income was 8.75 billion yuan, the gross profit was 22.4%, and the net profit was 422 million yuan. The main products are heavy petrochemical reaction vessels, nuclear power equipment, metallurgical complete sets of equipment and large power equipment forging castings, etc., with income accounting for 30%, 14%, 27% and 16% respectively, and profits accounting for 38%, 23%, 11% and 18%, respectively.
China's heavy machinery industry will grow steadily. Benefiting from the optimization of the spatial layout of energy and raw material processing, China's heavy machinery industry will continue to maintain a growth rate of 10%. The effect of economies of scale makes the industry highly concentrated; the production mode of the industry takes the general contractor as the main body, and the global layout of the supply chain; the total package design capacity and the production capacity of large castings and forgings are the core competitiveness. The manufacturing performance of the first set of products is the flashpoint to enter new fields.
The company's nuclear power products will first decline and then rise in the next three years, and 100% growth will be ushered in in 14 years. The company occupies 80% of the market share of domestic nuclear pressure vessels, has the supply performance of the world's first AP1000 pressure vessel, and has become the only enterprise in the world with the manufacturing capacity of third-generation nuclear island castings and complete sets of equipment. The moratorium on nuclear power last year will lead to a 30% decline in revenue from nuclear power products this year and 40% next year, but there is a high probability that nuclear power approval and construction will resume this year, which will boost the company's nuclear power products 100% growth in 14 years.
The demand for metallurgical equipment in Zhanjiang and Fangchenggang projects will make up for the decline in the company's nuclear power products. The NDRC will need 2 billion steel rolling equipment to approve large-scale steel projects in Zhanjiang and Fangchenggang. The company's steel rolling equipment is deeply embedded in the global supply chain, and it is conservatively estimated that more than 1 billion yuan of steel rolling equipment orders will be obtained by relying on general contractors such as Vai and West Mark. The company also extends to the field of general contracting, providing rolling equipment solutions for some small and medium-sized iron and steel enterprises.
The company's petrochemical containers, large hydropower and thermal power forgings will grow steadily. The company has supplied 80% of domestic petrochemical pressure vessels and manufactured the world's largest petrochemical hydrogenation equipment and coal liquefaction equipment. With the increase of oil consumption, the petrochemical container business will maintain 6% growth. The company's thermal power and hydropower casting and forging business will maintain an average annual growth of 5% as China promotes the development of Kengkou power plant and hydropower.
The target price is 3.90 yuan, which is recommended and rated. It is predicted that the EPS from 2012 to 2014 is 0.06,0.07 and 0.08 yuan respectively, and the corresponding PE is 58,50,44 times. In view of the fact that the market has fully reflected the impact of the decline in nuclear power and metallurgical business, and the Fangchenggang and Zhanjiang iron and steel projects and the opening of nuclear power gates will improve the company's profitability, we give the company 65 times, 56 times and 49PE in 12-14 years, with an estimated target price of 3.90 yuan in 6-12 months.
Risk hint: nuclear power failed to restart as scheduled, Zhanjiang Fangchenggang project failed to approve as scheduled will reduce the company's downstream demand.
