Introduction to this report:
The company is a leading industrial stainless steel pipe enterprise in China and has strong competitiveness. The company's debt conversion project brought growth, and the company is based on high-end and has begun to develop high-end pipes. We believe that the company has broad room for future growth.
Key points of investment:
Covered for the first time, a “gain” rating was given. We estimate that the company's net profit for 2023-2025 will be $353, 493, and 581 million yuan, respectively, and corresponding EPS of 0.63, 0.88, and 1.04 yuan respectively. Referring to similar companies, the company was estimated at 12 times PE in 2024, corresponding to a target price of 10.56 yuan.
Covered for the first time, a “gain” rating was given.
Develop high-end pipes, and there is plenty of room for growth. The company successfully replaced imports in the fields of stainless steel pipes for nuclear power and boiler tubes for supercritical thermal power units. China's investment in nuclear power and thermal power is growing rapidly, and the company's demand for high-end products continues to increase. Furthermore, the company and Sinopec Engineering have jointly developed convection section furnace tubes for ethylene cracking furnaces. They have now entered the trial production stage, and are expected to gradually contribute more in the future. Through continuous research and development, the company's high-end products will continue to be realized, and the company has broad room for future growth.
Investment in thermal power is booming. Combined with demand for equipment renewal, demand for boiler tubes is expected to continue to boom. In 2023, China added 65.67 GW of thermal power equipment, the highest level since 2010, with a year-on-year increase of 46.88%. At the end of 2023, the National Development and Reform Commission, in conjunction with the Ministry of Industry and Information Technology, issued a notice on the “Action Plan for Green, Low-Carbon, and High-Quality Boiler Development”, which proposed “phasing out inefficient and outdated boilers.” The investment boom in thermal power is compounded by the elimination of old boilers, and we expect demand for boiler pipelines to remain strong.
Investment in petrochemicals continues to grow. In 2022, the fixed asset investment growth rate of China's chemical raw materials and chemical products manufacturing industry was above 15%, and in 2023 it was above 13%, and the industry's capital expenditure remained at a high level.
Furthermore, the total capital expenditure of “three barrels of oil” in 2022 was 405.249 billion yuan, an increase of 71.25 billion yuan over the previous year. Overseas oil and gas investment is driven by high oil prices, and demand for petrochemical stainless steel pipes is expected to continue to grow.
Risk warning: The progress of the convertible bond project fell short of expectations, and the price of stainless steel fluctuated greatly.