Zheshang Securities: Gives a buy rating to Emerging Casting Pipe

2022-01-19Zheshang Securities Co., Ltd. Liu Gang, Ma Jinlong conducted a study on emerging casting pipes and released a research report "Emerging Casting Pipe Depth Report: Global Ductile Pipe Leading Enterprise, Steady Growth Is Expected to Drive Performance Outbreak", this report gives a buy rating to Emerging Casting Pipe, and the current stock price is 5.16 yuan.

Emerging Cast Pipe (000778)

Investment essentials

Xinxing cast pipe is an integrated enterprise of steel smelting and calendering and processing, and ductile iron pipe is the core product

Xinxing Pipe Casting Co., Ltd. was founded in 1971 Chinese the 2672 Project Headquarters of the People's Liberation Army, is the core enterprise of the central enterprise Xinxing Jihua Group, and produced the first centrifugal ball mill casting pipe in 1993, breaking the international monopoly. The company has the upstream steel smelting to processing of the whole process of efficient production technology, while the production of ordinary steel, special steel, as well as the core product ductile iron pipe, some cast pipe products further deep processing into pipe fittings and castings. At present, it has a steel production capacity of 5 million tons, casting pipes and pipe casting products of 3.2 million tons, mainly used in the fields of water supply, water supply, drainage, industrial and mining water, seawater desalination, sewage and heating.

Ductile pipe industry concentration is high, in terms of technology, production capacity, output, the company is the global ductile pipe leader

In terms of production and marketing, the company has formed a ductile iron pipe production capacity layout covering major regions at home and abroad, including Hebei, Shanxi, Anhui, Hubei, Sichuan, Xinjiang, Guangdong and other places; the sales network covers Asia, Europe, Africa, the Americas, and the products are exported to more than 120 countries in the world. In terms of technology, the company's key technology and equipment of centrifugal ductile iron pipe won the Chinese patent gold award, the company is the main drafting unit of the national standard of centrifugal ductile iron pipe, presided over the participation in the revision of 30 standards, through the leading revision of ISO10804, ISO8180, ISO21052 and other international standards, into the core circle of international standardization in the field of casting pipe. At present, the company's casting capacity is 3.2 million tons, which is the largest ductile iron pipe production enterprise in China, which is much higher than other domestic competitors in the same industry and is also in a leading position in the world.

The steady growth direction in 2022 has been determined, and the downstream demand for ductile pipes is expected to break out

Ductile iron pipes are widely used in municipal and water conservancy projects in the fields of water supply, gas supply, drainage, and sewage due to their many advantages of good toughness, high strength, corrosion resistance, convenient construction and high cost performance. The central economic work will set the tone that next year's economy will be mainly stable, and it is necessary to moderately advance infrastructure investment, and supporting the construction of water conservancy, municipal and new infrastructure is one of the important stable growth starting points. Water conservancy projects are expected to accelerate; the current leakage rate of urban pipe networks in mainland China is 13.39%, and the renovation of old water supply pipelines is expected to release new pipeline demand; the development of new rural construction, the scale of municipal pipe networks will also increase significantly. Under the background of "stable economy", ductile pipe is expected to accelerate the release of demand again, which will open a new round of prosperity cycle in the industry.

Earnings forecasts and valuations

It is expected that the company will achieve operating income of 509, 535 and 55.6 billion yuan in 2021-2023, an increase of 18.50%, 5.11% and 3.86% year-on-year, and achieve net profit attributable to the mother of 22.31, 36.13 and 4.228 billion yuan, an increase of 23.12%, 61.93% and 17.01% year-on-year, corresponding to EPS of 0.56, 0.91 and 1.06 yuan. The current price corresponds to PE of 8.80, 5.43 and 4.64 times. Based on the company as the absolute leading enterprise in the casting pipe industry in mainland China, it will fully enjoy the dividends of the rapid development of the pipeline industry in the future. Taking into account the leading position of emerging casting pipes in its own track and the consideration of the optimization space of the company's product structure, the company will be given a price-earnings ratio of 10 times in 2022. First coverage, giving a "Buy" rating.

Risk Warning: The policy landing is not as expected, the price of upstream raw materials has risen sharply, and the environmental protection policy has been tightened.

A total of 1 institution has given a rating and a buy rating in the last 90 days; the average target price of the institution in the past 90 days is 5.9; the Valuation Analysis Tool of The Star of Securities shows that the good company of Emerging Pipe (000778) has a rating of 3.5 stars, a good price rating of 4 stars, and a comprehensive valuation rating of 3.5 stars. (Rating Range: 1 ~ 5 stars, maximum 5 stars)