The company disclosed its annual report on March 28, 2023, and achieved revenue of 2,526 million yuan in 2022, an increase of 30.68%; the net profit returned to the mother was 298 million yuan, an increase of 67.34% over the same period. Among them, Q4 achieved revenue of 783 million yuan, an increase of 39.16% over the previous year, and achieved net profit of 96 million yuan to the mother, an increase of 56.03% over the previous year. The performance was in line with expectations.
Management analysis
The product grade structure continues to be optimized, and sales prices and profit per ton are increasing: in 2022, the company aimed to produce 1112,000 tons of silicon steel, corresponding revenue of 1,499 million yuan, an increase of 45.46%, gross profit margin of 24.06%, an increase of 6.56 pct, mainly due to the increase in sales price and profit per ton due to the increase in high-grade output ratio and cost optimization. According to the announcement, the 80,000-ton high-grade project will be partially put into operation in June 2023 (with an additional production capacity of 20,000 to 30,000 tons) and fully put into operation in June 2024 (with an additional production capacity of 5-6 million tons). The supply capacity for high-end materials for transformers will be further increased.
The power transmission, distribution and control business is growing steadily, and the collaborative advantage of the industrial chain is obvious: transmission, distribution and control equipment revenue in 2022 was 977 million yuan, an increase of 15.61%, and the gross profit margin was 14.83%, a year-on-year decrease of 6.93 pct, mainly due to rising raw material prices. The “14th Five-Year Plan” configuration transformation is accelerating, energy efficiency upgrades are becoming stricter, wind and solar installations are rising, and demand for power transmission and transformation equipment is expected to grow rapidly. The two major businesses within the company promote each other and develop collaboratively, and the advantages of the industrial chain are obvious. With the expansion of production capacity and the upgrading of production lines, future operations are expected to accelerate.
Dual carbon drives the upgrading of energy efficiency standards, and demand for high-grade silicon steel is rising: in a dual-carbon context, domestic power grid transformation has led to a sharp increase in demand for energy efficiency products. Since 2021, new energy efficiency standards for power transformers and motors have been implemented one after another, driving a rise in demand for high-grade silicon steel.
Taking power distribution as an example, grade 1/2 energy efficiency cores need grades 075/085 and above oriented to silicon steel.
Furthermore, high downstream booms such as photovoltaics, wind power, charging piles, energy storage, and data centers are expected to increase demand.
Investment in scientific and technological innovation increased, and high-grade products surpassed 23QH080: The “Huize Research Institute” planning and construction was completed in 2022. A total of 17 R&D projects were invested, and R&D expenditure was 100 million yuan, an increase of 102 million yuan over last year. The current 50,000-ton high-magnetic-induction-oriented silicon steel production line has surpassed the 23QH080 grade through technical reform, and the share of high-grade output continues to increase.
Profit Forecasts, Valuations, and Ratings
We expect the company to achieve net profit of 358 million, 537 million and 718 million yuan respectively in 2023-2025, corresponding to EPS 1.08/1.61/2.15. The current price of the company's stock corresponds to three-year PE of 20/13/10 times, maintaining the “buy” rating.
Risk warning
Fluctuations in the RMB exchange rate; majority shareholders reduced their holdings; the ban on restricted shares lifted.