Event Overview: The company publishes its 2024 semi-annual report. With 2024H1, the company achieved revenue of 20.297 billion yuan, up 17.1% year on year; net profit to mother was 0.428 billion yuan, up 100.4% year on year; net profit after deducting non-return to mother was 0.309 billion yuan, up 55.9% year on year. With 2024Q2, the company achieved revenue of 10.992 billion yuan, up 11.6% year on year and 18.1% month on month; net profit to mother was 0.305 billion yuan, up 155.2% year on year and 149.3% month on month; net profit without return to mother was 0.194 billion yuan, up 74.4% year on year and 68.7% month on month.
Comment: Sales increased year on year, gross margin increased year on year
1. Volume: Sales increased year-on-year. 2024H1, the company's total sales volume of cold-rolled products was 1.6045 million tons, up 37.24% year on year, of which 300/400 series cold-rolled stainless steel coils were 1.2838/0.2371 million tons respectively, up 26.30%/57.65% year on year; Q2, the company's 300/400 series cold-rolled stainless steel coil was 0.6883/0.1329 million tons, respectively, up 13.81%/47.34% year on year.
2. Price: Gross margin increased year-on-year. 2024H1, the average sales price of the company's 300 series products was 13,706 yuan/ton, down 10.9% year on year. The average sales price of 400 series products was 7,301 yuan/ton, down 3.9% year on year. 2024H1, the company's gross profit margin was 5.81%, +1.06pct year-on-year. In 24Q2, the company's gross profit margin was 6.67%, +1.88pct month-on-month, and +1.93pct year-on-year.
3. Non-operating profit and loss: 2024H1, the company confirmed a net income of 108.9 million yuan from relocation compensation in Area A of Zhejiang headquarters.
Future core highlights: New production capacity is being built in an orderly manner, multiple projects are steadily progressing 1. Multiple projects are being built in an orderly manner, and sales volume continues to grow. 2024H1, Guangdong Yongjin's “annual processing 0.35 million ton wide precision stainless steel strip technology transformation project” and Zhejiang Yongjin's “annual processing 0.195 million ton ultra-thin precision stainless steel strip project” released production capacity. At the same time, Vietnam's Yongjin production capacity utilization rate was further increased, further enhancing the company's overall profitability. The company plans to produce and sell 3.2 million tons of cold-rolled stainless steel in 2024, an increase of about 13.5% over the previous year, and the company's scale effect is expected to gradually show.
2. A fixed increase of 1.2 billion yuan was raised to guarantee construction capital for production expansion projects. The company completed a fixed increase in April 2023, issuing 444,115,47 shares at an issue price of 27.02 yuan/share, and raised about 1.2 billion yuan in capital for 0.22 million-ton cold-rolled stainless steel in Yongjin, Gansu and 0.35 million-ton cold-rolled stainless steel projects in the third phase of Guangdong Yongjin.
3. Implement diversified development strategies and lay out the special case material business for titanium alloys and cylindrical batteries. The company plans “0.06 million tons of titanium alloy new material project with an annual output of 0.225 million tons” and a “special shell material project for cylindrical batteries with an annual output of 0.225 million tons” in 2022. The new material project is a reflection of the company's integrated industrial chain to implement an integrated, diversified development strategy. Currently, the progress of the two new materials projects is 61.52% and 18.98%, respectively.
Investment advice: With the gradual commissioning of the company's multiple precision cold-rolled stainless steel strip projects and the horizontal expansion of the new materials business, we expect the company's net profit to be 0.743/0.819/0.906 billion yuan respectively in 2024-2026, corresponding to the current price. PE will be 8/8/7 times in sequence in 2024-2026, maintaining the “recommended” rating.
Risk warning: The project process falls short of expectations; demand for stainless steel falls short of expectations; raw material prices fluctuate greatly.