Summary of events: 2023H1, the company achieved revenue of 718 million yuan, an increase of 25% over the same period last year, a net profit of 51 million yuan, an increase of 79.5%, and a non-return net profit of 51 million yuan, an increase of 77.7% over the same period last year.
2023Q2, the company achieved revenue of 413 million yuan, an increase of 33% over the same period last year, an increase of 35.5% over the same period last year, a net profit of 31 million yuan, an increase of 101.1% over the same period last year, an increase of 55.6% over the previous year, and a non-return net profit of 31 million yuan, an increase of 100.5% over the same period last year and 60.7% over the previous year.
Comments: structural optimization helps to improve performance, gross profit margin increases ①: stainless steel seamless steel pipe revenue share increases, contract liabilities increase. Affected by the policy, the relationship between supply and demand in the thermal power industry has gradually changed from a buyer's market to a seller's market, and the company's thermal power boiler tube orders have increased significantly, of which the proportion of revenue from stainless steel seamless steel tubes increased by 11.97pct to 29.8%, and gross profit increased by 19.41pct to 51.16%. In addition, the company's contract liabilities totaled 8.75 million yuan, an increase of 111.38 percent over the same period last year.
② price: the company's gross profit margin has improved. By adjusting the product capacity structure, the company expanded the production capacity of alloy steel and stainless steel pipe, and strengthened cost control, so that 2023H1 gross profit margin increased 2.27pct to 15.13%.
Quarter-on-quarter, 2023Q2 gross profit margin improved 0.2pct, year-on-year increase 1.2pct to 15.21%.
Future core focus: capacity release to grab thermal power demand, product upgrading to boost profit growth ① thermal power boiler tube bidding for continuous volume, super stainless steel pipe supply and demand is tight. Experts expect the subsequent annual approval of about 8000 kilowatts (equivalent to 80GW), which will bring 200 million kilowatts of new installed capacity in the next three years, and the upgrading of old coal-fired power units will further boost the demand for super stainless steel seamless tubes. However, because of the high supply barriers between S30432 and HR3C, it is difficult for new manufacturers to quickly cut into the supply system of boiler plants, and the supply elasticity is limited, which is expected to support the price of thermal power boiler tubes.
② is actively put into production to seize the opportunity of market recovery. By the end of June 2023, the company's S30432 products had completed orders of 20315 tons, accounting for nearly 60% of the market share of domestic S30432 small diameter tubes. In order to actively seize the opportunity of recovery in the thermal power market, the company's total production capacity of 40, 000 tons of stainless steel and alloy steel seamless steel tubes for special equipment has reached its scheduled state on March 31, 2023, with a cumulative fund raised of about 160 million yuan.
③ technology innovation to achieve product leadership. By the end of June 2023, the company's product TP310HCbN, as the highest grade domestic stainless steel material, has signed several orders totaling 1988 tons; the new Ni-Fe-based HT700 superalloy mainly used in 700℃ advanced ultra-supercritical coal-fired generating sets is under research and development; mn-N series austenitic alloy material has entered the stage of small batch production and is expected to be put into the market in bulk.
Investment advice: benefiting from the increased demand in the thermal power boiler tube industry and the continued release of new production capacity, we expect the company to achieve a net profit of RMB 2.0810 million in 2023-25, respectively. Corresponding to the closing price on August 15, PE is 17 times, 11 times and 10 times respectively, maintaining the "recommended" rating.
Risk tips: the project schedule is not as expected; the risk of rising raw material prices; downstream demand is not as expected.