This report is read as follows:
The company's 2021, 2022Q1 performance is in line with expectations. The company insists on optimizing its product structure, and with the gradual release of its newly built high-end electrical steel production capacity, the company's profitability will be further improved.
Main points of investment:
Maintain the "overweight" rating. In 2021, 2022Q1 achieved revenue of 1340 yuan and 31.8 billion yuan, up 68% and 8.77% respectively over the same period last year; and realized net profit of 70.14 yuan and 1.054 billion yuan, an increase of 293% and 0.98% respectively over the same period last year. We maintain the company's EPS forecast of 1.04 yuan in 22-23 and 1.15 yuan in 2024 EPS, corresponding to the net profit of 80.83 plum in 22-24, and maintain the target price of 7.98 yuan and maintain the "overweight" rating.
The product structure has been continuously optimized and the profitability has been significantly improved. In terms of automobile plates, the company's output of automobile plates increased by about 5% in 21 years compared with the same period last year, of which the output of high-end products such as galvanized, high-strength and outer plates increased by 18%, 20% and 14% respectively compared with the same period last year. In terms of electrical steel, the proportion of high-end electrical steel in the company in 19-21 was 34%, 40% and 48% respectively. 2022Q1 further rose to 50%. In 21 years, the gross profit margin and net profit margin of the company increased by 2.93 and 3.19 percentage points respectively. The company's product structure has been continuously optimized and its profitability has been continuously improved.
The supply of raw materials is stable and the cost advantage is significant. In terms of iron ore, Shougang Group, the company's controlling shareholder, has a production capacity of about 2400 million tons / year of iron concentrate at home and abroad, and after its construction of Macheng Iron Mine has been put into production for 23 years, the production capacity of iron concentrate will increase by 7 million tons / year; in terms of coal and coke, the company's shareholding company Qian'an Sinochem, Xishan Coking, and Shougang Fushan Resources Group, which is a shareholder of Shougang Group, can supply coke and coal for the company. In the context of the sharp rise in raw material prices, the company's raw material supply is stable, and the raw material procurement cost has a significant advantage.
The production capacity of electrical steel has expanded and the proportion of high-end products has increased. The production capacity of high-end electrical steel under construction will be gradually put into production, and it is expected that in June 22, the company will increase the production capacity of non-oriented electrical steel by 350,000 tons per year, and 2023Q1 will increase the production capacity of ultra-thin high magnetic induction oriented electrical steel by 90,000 tons per year. It is expected that the proportion of the company's high-end electrical steel will rise to more than 70% by 25 years, which will significantly boost the company's profitability.
Risk hint: the production capacity under construction has been delayed and the price of raw materials has risen sharply.