Introduction to this report:
The company's 2023 results were in line with expectations, and the 24Q1 results fell slightly short of expectations. As demand in infrastructure and other fields picks up, and production capacity in the company's newly invested projects is released, operations are gradually on the right track, and the company's profit is expected to increase further.
Key points of investment:
Maintain an “Overweight” rating. Net profit for 2023 and 24Q1 was 5.70 million yuan, up 91.85% year-on-year and down 99.37%. The 24Q1 performance was lower than expected. Considering that industry demand is still under pressure, the 24-25 net profit forecast was lowered by 720/813 million yuan (originally 1,062/1,212 million yuan), and an additional 26-year net profit forecast of 886 million yuan was added, corresponding to EPS of 0.50/0.57/0.62 yuan. Referring to comparable companies, the PE valuation was given 13 times in 24 years, the target price was lowered to 6.55 yuan (originally 7.69 yuan), and the “gain” rating was maintained.
Volume gains rose sharply in 2023, and 2024Q1 margins declined under pressure. In 2023, the company's welded pipe production and sales volume was 2028, 13.6 million tons, up 0.86% year on year and down 0.26%; net profit per unit product was 41.91 yuan/ton, up 92.35% year on year. Facing downward pressure from industry demand in 2023, the company still achieved a double increase in welded pipe production and single-ton profit. However, in 2024Q1, in the face of continued downward pressure on demand, the company's gross profit margin and net profit margin declined, from 2.85% and 0.94% in 2023 to 2.30% and 0.03% in 2024Q1, respectively. In the later stages, as demand in infrastructure and other fields picks up, the company's profitability is still expected to pick up.
Profitability is expected to increase by speeding up the commissioning of newly launched projects. In 2023, the net profit of Tangshan Youfa New Building Materials, a holding subsidiary of the company, was -185 million yuan, mainly due to the fact that its production capacity was not fully put into operation and production, resulting in high costs and high sales expenses in the newly developed market. As of the 2023 semi-annual report, the production capacity of 2 million tons of buckling scaffolding planned by Tangshan Youfa has been built. In the later stages, the company will focus on increasing production and sales in order to dilute various expenses and increase profit levels. In addition, the company still has projects such as stainless steel expansion and Handan Youfa Plating Improvement and Expansion. As new investment projects are gradually put into operation, the company's product structure is expected to be further optimized and profitability is expected to increase.
The leading position continues to be consolidated, and overseas layout is being actively expanded. The company is a leading domestic welded pipe manufacturer and has ranked first in the country in terms of production and sales for 18 consecutive years. The company is simultaneously seeking the layout of overseas production bases in Southeast Asia and the Middle East. The company's leading position continues to be consolidated, and it is expected to gradually achieve a global layout in the future.
Risk warning: The recovery in demand fell short of expectations, and the commissioning and delivery of new projects fell short of expectations.