Introduction to this report:
2023H1 Company's performance was in line with expectations. In the context of a stable economy, as demand gradually picks up, the company's profit margin level is expected to continue to rise.
Key points of investment:
Maintain the “increase in holdings” rating. By 2023H1 achieved operating income of 2,879 million yuan, a year-on-year decrease of 5.31%; realized net profit of 137 million yuan, an increase of 8% over the previous year, and performance was in line with expectations. The company's net profit forecast for 2023-2025 was maintained at 311/388/467 million yuan, corresponding to an EPS of 0.60/0.74/0.90 yuan. Maintain the company's target price of 7.71 yuan and maintain the “increase in holdings” rating.
Asset structure optimization and profitability improvement. By the end of June 2023, the company's balance ratio had fallen to 23.92%, a further decrease of 6.27 percentage points from the end of 2022; the financial expenses of the 2023H1 company were fully funded, and the financial expenses ratio was -0.17%, down 0.31 percentage points from '22. The gross profit margin and net profit margin of 2023H1 were 12.24% and 5.4% respectively, up 1.38 and 1.06 percentage points from '22; as demand gradually picks up, the company's profit margin level is expected to continue to rise.
The company is a leader in welded steel pipes, and product competitiveness will continue to improve. The company is a leading supplier of welded steel pipes in China, with a production and sales scale of about 1 million tons. In 2022, the company produced 1,022,200 tons of various types of pipelines and sold 1,010,900 tons. The “600,000 tons of high-quality welded pipes and factory prefabricated deep-processing pipes and fittings” project under construction is being actively promoted, with a planned total investment of 680 million yuan. After completion, it will help enhance the company's overall product competitiveness and profitability.
Establishing a new wholly-owned subsidiary is conducive to enhancing overall competitiveness. On July 19, 2023, the company announced that it will invest 20 million yuan of its own capital to establish a wholly-owned subsidiary Jinzhou Wisdom, which is conducive to further expanding the company's business structure and development space, enhancing overall competitiveness, and promoting the company's sustainable and healthy development in the future.
Risk warning: The recovery in demand fell short of expectations, and the progress of construction of new projects fell short of expectations.