Core views

In the first half of the year, while some thermal power tubes were still at last year's prices, and the price of raw materials, nickel and iron fell this year, the average sales price of the company's products still achieved a significant increase. The rise in demand brought about by the boom in the chemical side and the contribution of the company's high-end sales products is obvious.

The company's debt-transfer investment project “High-performance stainless steel seamless pipe project for high-end equipment with an annual output of 20,000 tons” is expected to be put into operation in the third quarter, full production in the fourth quarter, and is expected to increase sales by 5,000 tons in the second half of the year. The implementation of the project will help the company to further develop the market, increase the company's product coverage and market share, and achieve the company's sustainable development.

In December of last year, the company announced that it had won the bid for 1.2 million meters of S30432 stainless steel pipes required for thermal power units, with a total amount of about 370 million yuan. The order locked in price ahead of time, making it impossible to enjoy the dividends of subsequent price increases. As the execution of the price lock order nears completion, the average price and gross margin of the company's products are expected to increase further in the later stages.

occurrences

The company released the 2023 semi-annual report.

Revenue for the first half of 2023 was 1,828 billion yuan, +44.2% year on year. Net profit attributable to shareholders of listed companies was 184 million yuan, +123.3% year-on-year. Net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 174 million yuan, +209.8% year-on-year.

The basic earnings per share was 0.33 yuan, +123.3% year-on-year.

Among them, revenue for the second quarter was 960 million yuan, +36.9% year-on-year. Net profit attributable to shareholders of listed companies was 111 million yuan, +122.3% year-on-year. Net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was $107 million, +130.3% year-on-year. The basic earnings per share was 0.2 yuan, +58.8% year on year.

Brief review

Both volume and price increased significantly in the first half of the year, and the contribution of high-end company products was obvious.

Seamless pipes: In the second quarter, the company produced 16,000 tons of seamless pipes (+40,000 tons), with sales volume of 14,000 tons (+0.2,200 tons), total output in the first half of the year was 28,000 tons (+0.54 million tons), and sales volume was 22,000 tons (+0.43 million tons). Production and sales increased significantly. On the price side, the average price of H1 seamless pipes is 46,000 yuan/ton, an increase of 0.47 million yuan/ton compared to last year's average. While some thermal power tubes are still at last year's prices, and the price of raw materials, nickel and iron, falls this year, the average sales price of the company's products has still achieved a significant increase. The rise in demand brought about by the high level of prosperity on the chemical side and the contribution of the company's high-end sales products is obvious.

Welded pipes: In the second quarter, the company produced 0.84 million tons of welded pipes (+0.1 million tons) and sold 0.95 million tons (-0.24 million tons). The total output for the first half of the year was 18,000 tons (+0.53,000 tons), and sales volume was 16,500 tons (+0.43 million tons). Production and sales increased rapidly year on year.

On the price side, the average price of Q2 welded pipes is 30,000 yuan/ton, an increase of 0.24 million yuan/ton compared to last year's average, and has also achieved a high growth rate.

The fund-raising project is about to be put into operation, and the sales volume and variety structure will rise further.

The company's debt-transfer investment project “High-performance stainless steel seamless pipe project for high-end equipment with an annual output of 20,000 tons” is expected to be put into operation in the third quarter, full production in the fourth quarter, and is expected to increase sales by 5,000 tons in the second half of the year. In addition, the fund-raising project mainly produces stainless steel seamless pipes for high-end equipment such as boiler tubes and heat exchanger tubes, etc., which can be widely used in the power, petrochemical, high-end equipment and other industries. It is an upgrade of the company's existing product fields and an expansion of specifications. It is complementary to the company's existing products, and can meet the needs of the high-end market and replace imported products. The implementation of the project will help the company to further develop the market, increase the company's product coverage and market share, and achieve the company's sustainable development.

The execution of price lock orders is nearing completion, and there is room for further increase in product gross margin.

In December of last year, the company announced that it had won the bid for 1.2 million meters of S30432 stainless steel pipes required for thermal power units, with a total amount of about 370 million yuan. The order locked in price ahead of time, making it impossible to enjoy the dividends of subsequent price increases. As the execution of the price lock order nears completion, the average price and gross margin of the company's products are expected to increase further in the later stages.

The chemical boom continues to be high, and domestic substitution and exports are gaining strength in both directions.

Boiler tubes and heat exchange tubes are all precedents for the successful localization of high-end industrial pipes. In 2022, the company also cooperated with Sinopec to develop the “stuck neck” product, ethylene cracking furnace tubes, in an effort to break foreign monopolies. Domestic substitution prospects are broad in the field of industrial pipes, and the company is expected to be highly profitable as a senior player in the field of high-end stainless steel pipes. Furthermore, the gross margin of the company's export orders has always been higher than that of domestic orders, and this year's increase in exports will also continue to increase profits.

Profit forecast and investment advice: We predict that the company's net profit for 2023-2025 will be 425 million yuan, 581 million yuan, and 652 million yuan, respectively. The corresponding PE was 10.4, 7.6, and 6.8 times, respectively, and was given a “buy” rating.