Yongjin Co., Ltd.: stainless steel cold rolling leader further layout the global market [institutional review]

Report guide

On the evening of January 12, Yongjin shares (hereinafter referred to as "the company") issued the announcement on the establishment of holding subsidiaries and related party transactions in foreign investment. In order to speed up the development of overseas markets and enhance the share of the international market and the overall profitability of the company, the company intends to decide to set up Yongjin Metal Technology (Indonesia) Co., Ltd. in Indonesia through wholly-owned subsidiary Xinyue assets and related party Youth Exhibition Industry, to build an annual processing project of 700000 tons of wide cold-rolled stainless steel strip. Among them, Xinyue assets holds a 60% stake in the project company, and Qingzhan Industry holds a 40% stake. The total investment of the project is expected to be 2.1325 billion yuan, of which the construction investment is 1.257 billion yuan and the planned construction period is 2 years.

Main points of investment

Look at the global positive layout

With the recovery of the global economy, the demand for stainless steel in overseas markets is growing rapidly. The price of stainless steel overseas has long been higher than that of the domestic market. The establishment of Yongjin in Indonesia will accelerate the global layout of the company. At present, the company has successively promoted three overseas bases of Yongjin in Vietnam, Yongjin in Thailand and Yongjin in Indonesia, with a production capacity of 250000 tons, 260000 tons and 700000 tons respectively.

According to the project construction cycle of the company, it is estimated that during the period from 2023 to 2025, the seafood outside the company will be put into production and reach production one after another. At the same time, the products of the overseas production base will be mainly oriented to the overseas market. As the overseas stainless steel price is higher than the domestic price, the profit space of the company's overseas products will be higher than that of the As overseas production capacity is put into production, the company's overall profit margin is expected to increase significantly.

Cold rolled stainless steel faucet continues to grow

As a leading enterprise in the field of stainless steel cold rolling, the company has realized scale advantage and cost advantage through years of operation. With the deep integration with Qingshan Group, the profit level of the company's products has remained stable for a long time. At the same time, with the overseas layout and the commissioning and production of high value-added products, and the continuous expansion of the scale of the superimposed company in the next 4-5 years, the company already has the dual driving force of "profit thickening + scale growth", and the company will continue to grow in the future.

Profit forecast and valuation

As a leader of cold-rolled stainless steel, the company has a stable profit margin. The continuous increase in production capacity will continue to contribute to the growth of the company's performance. It is estimated that from 2021 to 2023, the company's operating income will be 258.63, 350.92, and 455.22 yuan respectively, with a net profit of 5.84 million, and a year-on-year growth rate of 40.93%, 38.80%, and 28.32%, respectively, and a corresponding EPS of 3.48, 4.46 yuan, respectively. According to the closing price on January 12, the corresponding PE is 23.33 16.81 and 13.10 times, respectively. The company has high certainty of growth and maintains a "buy" rating.

Risk tips: new project construction and production is not as expected, downstream demand is not as expected and corporate governance and other risks.

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