Zhixin electromagnetic is the R & D, manufacturing and sales base of electrical steel, and has become the world's leading electrical steel manufacturer and service provider. According to the company's mid-2022 report, the company's electrical steel output was 717000 tons, down 10.1% from the same period last year. Among them, the output of oriented electrical steel was 97000 tons, up 3.4% over the same period last year; the output of medium and low grade non-oriented electrical steel was 270000 tons, down 41.5% from the same period last year; and the output of high-grade non-oriented electrical steel was 350000 tons, up 44.2% from the same period last year. The sales income of metal soft magnetic materials is 6.498 billion yuan, accounting for 10.18% of the operating income. It is expected that the future energy saving and efficiency improvement requirements of distribution transformers and the development of new energy vehicles will be beneficial to the demand of oriented electrical steel and non-oriented electrical steel.
The car board of the company has excellent craftsmanship and the output has increased steadily. In 2022, the initial launch of zinc-aluminum-magnesium coating products successfully realized the replacement of the side circumference of electroplated galvanized car body, and the domestic launch of the new generation of ultra-fine grain high-strength UF steel products also received a positive response from downstream users. The company currently has 10 automotive plate production lines, with full product line supply capacity, design capacity of 6 million tons / year. In 2021, the company's car plate output is 3.55 million tons, an increase of 5% over the same period last year, and the products achieve full-model coverage. It is expected that the company's car plate production will still have a steady increase in the follow-up.
The company is rich in tinplate product structure and has made many breakthroughs in the field of tinplate production. In the first half of 2022, the company actively expanded the channels of high-end products such as DI, Red Bull Iron and Milk Powder Iron. The can body was supplied in bulk with DI material. The May order of Red Bull Iron reached a record high; and the domestic market share of milk powder iron increased by more than 6 percentage points. The capacity utilization rate of Jingtang tinplate production line has reached 120%, and the market share of high-end products has remained at more than 10%.
Investment advice and rating: sluggish demand in the iron and steel industry has led to a decline in net profit per ton of traditional steel products, and it is conservatively expected that the return net profit in 2022-2024 will be much lower than that in 2021, so the target price will be lowered. Taking into account the obvious advantages of the company's electrical steel products and production capacity is still expanding, maintain the company's "buy" rating. It is estimated that the operating income of the company from 2022 to 2024 will be 1212.43 billion yuan, respectively, and the net profit will be 27.68 million yuan, 30.74 billion yuan, respectively. The reasonable valuation of the company in 2022 will be 43.09 billion yuan, which is 32.14% higher than the current market value of 32.609 billion yuan.
Risk tips: the sluggish demand for electrical steel products, the risk that the company's electrical steel sales are not as expected; the risk that the growth rate of new energy vehicle sales slows down and the demand for automobile plates falls short of expectations; the risk that performance forecasts and valuation judgments fall short of expectations.