The performance is basically in line with expectations, with an annual dividend rate of 25%. In 2021, the company achieved a revenue of 5.74 billion yuan, an increase of 10.0%. Excluding commodity trading business, its revenue was 4.72 billion yuan, an increase of 13.1%. The net profit returned to its mother was 660 million yuan, an increase of 23.7%, which was basically in line with expectations. The rapid growth of the company's performance is mainly due to the growth of the business of high-speed steel, cutting tools and titanium alloy and the steady increase in gross profit margin of core products. The board of directors decided to pay a dividend of 166 million yuan for the whole year, with a dividend rate of 25%, down from 35% last year, mainly due to a number of capital funding plans such as the second phase of powder metallurgy and the production line of high-end precision tools in 2022.
Solid core business growth, capacity expansion and product upgrades drive future revenue growth. In terms of products, in 2021, the company's revenue from die steel / high-speed steel / cutting tools / titanium alloy plate reached 23.9, 10.1, 10.6 / 260 million yuan respectively, an increase of 1.7 percent, 29.7 percent, 20.9 percent, 54.4 percent, and the second half of the year, revenue increased 3.7 percent, 38.5 percent, 25.1 percent, 98.5 percent, respectively. The decline in the growth rate of die steel is mainly due to the repeated decline in demand for die steel in the domestic epidemic; the rapid growth of high-speed steel is mainly due to the increase in tool demand in domestic and foreign markets, the timely increase in prices following the price of raw materials, and the increase in the proportion of high-end products; the growth of cutting tools is mainly driven by the growth of sales of high-end products; the substantial increase in titanium alloy revenue is mainly due to the company's active development of domestic and foreign civil markets.
We expect that in the future: 1) the expansion project of 50,000 tons of tool and die steel will be put into production, 2) 48 million cutting tools will be put into production in Thailand, 48 million pieces in the second phase will be completed by the end of 2022, 3) titanium alloy products will be converted to high-end wire materials, 4) Powder Metallurgy I will be put into production of 2000 tons, the second phase will be completed by the end of 2022, the company's product structure will continue to upgrade and revenue is expected to continue to grow.
The product upgrade pushes up the gross profit margin and the profitability continues to increase. In 2021, the company's comprehensive gross profit margin was 24.5%, an increase of 1.3 pct over the same period last year, of which the gross profit margin of die steel / high-speed steel / cutting tools / titanium alloy products was 26.6%, 32.5%, 28.4%, 16.0% respectively, with year-on-year changes of-1.5/+4.4/+9.5/-2.2pct. The increase in gross profit margin of high-speed steel and cutting tool products is mainly due to the increase in the proportion of high-end products, in addition to the strong cost transfer ability. The decline of gross profit margin of die steel and titanium alloy products is mainly due to weak demand and slow recovery of product prices.
In the future, as the company's product structure continues to upgrade (especially powder metallurgy volume), we expect the company's gross profit margin to continue to increase.
The company's expense rate during 2021 was 13.7%, an increase of 1.2pct over the same period last year, in which the R & D / financial expense rate decreased by 1.1pct/0.1pct to 4.8% and 2.8%, respectively, and the sales / administrative expense rate increased by 2.1pct/0.3pct to 3.8% and 2.3%, respectively. The increase in sales expense rate is mainly due to the increase in overseas freight volume and the shortage of maritime resources, while the increase in administrative expense rate is mainly due to the cancellation of social security subsidy policy. In 2021, the company's homing net interest rate will be raised to 11.6%, and its profitability will continue to increase.
Investment advice: benefiting from the increase in market share at home and abroad + the upgrading of product structure + the increase in the proportion of direct sales, the company's profits are expected to continue to grow steadily in the future. We predict that the homing net profit of the company in 2022-2024 will be 8.2x104max 1.26 billion yuan respectively, an increase of 24.0%, 26.0%, 21.0% and 23.7%, respectively, compared with the same period last year. The current stock price corresponds to 8.6 PE 6.9max 5.7 times in 2022-2024. Considering that the company is the leader in the subdivision of tool and die steel, its market share and profitability are expected to continue to improve, giving the company a target price of HK $5.45 (corresponding to 15 times PE in 2022) and maintaining a "buy" rating.
Risk hints: the risk of substantial fluctuations in raw material prices, the risk of changes in the international political environment, and the risk that the progress of powder metallurgy business is not as expected.