Net revenue/return to the mother in '21 was +14.0%/-47.7% year on year, maintaining the “buy” rating. On the evening of April 26, the company released the 21-year report and the first quarterly report of '22:21-year revenue/net profit of 2,36/110 million yuan, +14.0%/-47.7% year-on-year; 21Q4 revenue/-01 billion yuan, -4.6% /-0.5 billion yuan over the same period last year. The net profit returned to the mother in '21 was lower than our expectations (220 million yuan), due to higher prices of raw materials. If the company completes the acquisition of Kangtai Group (not listed), its production capacity scale and national layout are expected to be at the forefront of the industry, but due to the increase in raw material prices, the company's net profit is expected to return to the mother in 22-24 of $1.31/156/188 million (previous value of $269/333/100 million). The comparable company Wind in '22 expected an average of 19xPE. After considering the company's fixed increase in financing, its resilience to risks was stronger than that of comparable companies. The company was given 25xPE in '22, with a target price of 9.14 yuan (previous value of 13.37 yuan), maintaining the “buy” rating.
Pipe revenue grew steadily in '21. Higher raw material prices dragged down gross margin. According to annual reports, the company's pipe production capacity was 470,000 tons, output 280,000 tons, and capacity utilization rate of 59.44%. Pipeline production/sales reached 27.5/274,000 tons, +2.1%/+1.6% year on year. The company's sales price/cost/gross profit of 21 pipe tons was 8527/7169/1358 yuan, +11.1%/+22.1%/-24.7% year on year. During the same period, the company's PVC/PPR/PE revenue was 17.1/2.3/39 billion yuan, respectively, +10.5%/+36.5%/+0.1%; gross margin was 14.3%/31.8%/13.8%, respectively, and -8.5/-1.5/-6.0pct over the previous year. The company's overall gross margin in '21 was 15.9%, -7.6pct year-on-year; 21Q4 was 9.7%, -5.6pct month-on-month. The decline in gross margin was due to a large increase in the prices of major raw materials and increased competition in product sales.
The expense ratio remained stable during the 21-year period. Operating cash flow worsened, and the company's expenses rate for the 21-year period deteriorated by 9.6%, compared to -0.9 pct. The sales/management/R&D/finance expense ratio was 3.1%/3.7%/3.0%/-0.2%, and -0.4/+0.1/-0.5/+0.0pct over the previous year. The company's net interest rate in '21 was 4.7%, -5.6pct year-on-year; 21Q4 was -0.1%, -8.1pct/-4.8pct month-on-month, mainly dragged down by a decline in gross margin. The company's interest-bearing debt ratio/balance ratio in '21 was 5.1%/21.4%, +2.7/-1.5pct compared to the previous year. The company's net operating cash flow in '21 was 0.1 billion yuan, -98.1% year on year, mainly due to the increase in procurement expenses due to a large increase in the purchase price of raw materials.
Net profit returned to the mother in 22Q1 was -83.2% year on year, and net operating cash flow decreased by 0.5 million 22Q1 year on year to achieve revenue/net profit of 48/0.1 billion yuan, +1.3%/-83.2% year on year. In terms of profitability, 22Q1 gross margins and net interest rates to the mother were 12.7%/1.5%, compared to -9.4pct/-7.8pct over the previous year. This is mainly due to rising prices of major raw materials, and the Yunnan subsidiary losing a lot in the early stages of market development.
The expense rate for the 22Q1 period was 9.5%, +0.3pct compared to +0.3pct, of which the sales/management/R&D/finance expense ratio was 3.3%/4.0%/2.3%/-0.2%, and +0.7/+0.2/-0.6/+0.0pct over the previous year. Net operating cash flow in 22Q1 was 0.6 billion, a year-on-year decrease of 50 million, mainly due to increased procurement costs and increased expenses.
Risk warning: raw material prices have risen sharply; new production capacity cannot be digested in a timely manner; industry competition has intensified.