Based on the advantages of special steel materials, actively extend to the field of high value-added precision parts. Relying on the rare technology accumulation advantages of the whole industrial chain in the industry, such as melting, molding, heat treatment, finishing, etc., the company strategically entered into the subdivided fields of wind power, rail transit, precision machinery and equipment with "small market capacity, high technical requirements and great difficulty in production", gradually upgrading from basic materials to precision parts products, forming differential competition with traditional steel mills. In 21 years, the revenue of high-end special steel products accounted for 60%, an increase of 16pct over the same period last year.
The prosperity of the wind power field continues, and the large-scale trend promotes the upgrading of the industry. Combined with the improvement of domestic wind power bidding and the national wind power installation policy during the 14th five-year Plan, we estimate that the new domestic installed capacity CAGR will be 15.29% from 2022 to 2025, which will continue to increase industry demand. At the same time, driven by the trend of large-scale, it will raise industry barriers and further enhance industry concentration. In the past 20 years, the company's gross profit margin of high-power castings reached 28.46% when it was first put into production, which is the same as that of the industry leader, and the gross profit margin in 21 years exceeded the industry leader for the first time. As the company's technical renovation project phase II 100000 tons of casting blank and supporting 150000 tons of finishing projects concentrated at the end of the year, the company's performance is expected to improve.
The product structure is continuously optimized and the finishing project is worth looking forward to. The company's gear steel technology and technology is in a leading position in the industry. The company plans to invest 2.2 billion yuan to focus on 5MW windward electric gearbox related parts, which is expected to form 84000 pieces of finishing capacity of large gearbox parts and other precision mechanical parts, which will further optimize the company's product structure and bring new performance growth points for the company.
The mixed reform project has been successfully landed, and the production capacity of steel castings has continued to grow. The company and Dongfang Electric established a vast Dongqi joint venture in January 2021, and increased the production capacity of steel castings from 10000 tons to 30000 tons by means of technical transformation, production capacity improvement, cost reduction and efficiency improvement. At the same time, the company fully cooperated with Dongfang Electric in the field of wind power parts and special steel materials, and obtained 194 million yuan in sales revenue from Dongfang Electric in the past 21 years.
The field of high-end special alloys has raised funds and put into production, and the import substitution market is broad. The company continues to promote the special alloy capacity expansion project, and it is expected that when the project reaches production at the end of 2024, it will bring the company 3700 tons of new production capacity of special alloys such as superalloys. With the growth of domestic demand and military industrial certification, the capacity release will be guaranteed.
The price of raw materials has fallen, and the company's profits are expected to be repaired. The arrival of scrap steel began to pick up in the second half of 2022, steel production decreased significantly downstream, scrap prices began to decline, and the prices of raw materials such as pig iron and alloys also declined. The company's wind power business gross profit sensitivity to raw material prices is at a high level in the industry, and the decline in raw materials will greatly help the company's profits to repair.
Investment suggestion: the prosperity of the wind power industry continues, the company's wind power gearbox and casting finishing capacity is expected to be concentrated at the end of the year, long-term performance release is expected. We estimate that the company's homing net profit for 2022-2024 will be 1.3 million yuan, respectively, corresponding to the closing price on October 28, 2022, and the PE for 2022-2024 will be multiple of 53-23-13, maintaining the company's "recommended" rating.
Risk tips: the project is not as expected; the risk of rising raw material prices; downstream demand is not as expected.
