The transformer broke out at sea, and the core upstream was oriented to silicon steel

The first and second largest producers of oriented silicon steel are $Baosteel (SH600019)$ and $Shougang (SZ000959)$ respectively. I didn't choose these two, the reason is very simple, because through business analysis, the proportion of oriented silicon steel in the total revenue of Baosteel and Shougang may only be 33% and 42%, (why is it possible, because the disclosure is not specific enough, it can only be judged according to the words containing "cold rolling", update: last night someone pointed out that cold rolling also includes automotive steel plates, and Baosteel's income from oriented silicon steel may be less than 5%), the second reason is that the price fluctuations of these two stocks are relatively stable, so they may not be the companies that benefit the development of the transformer industry the most in terms of stock price. So, I looked at another company, which is the leading private enterprise $Wangbian Electric (SH603191)$, which currently has a production capacity of 100,000 tons of oriented silicon steel.

Wangbian Electric's oriented silicon steel business accounted for 58% of the revenue and 69.83% of the profit, indicating that the silicon steel business was relatively pure. The gross profit margin of the company's oriented silicon steel is 24.06%, the company's overall ROE is 16.28%, and the asset-liability ratio is 35.34%, which are absolute indicators. The compound growth rate of revenue of oriented silicon steel in 19-23 years is 48.93%, and the company as a whole is listed in 22 years, with a compound growth rate of 31.6% in revenue and 39.0% in net profit in 19-22 years, these are relative indicators. The above data is a bit much, but overall it is one word, good!

In addition, the company also operates transformer business, and is currently the only electrical appliance company with integrated upstream and downstream. In fact, seeing this, I already have the urge to buy, the stock price is currently 18.6, and the PE is also 18, and it is really okay to look at it, I don't know what you think. But reason tells me to be calmer the more I get to this point, and that the numbers that are too good can be a trap.

So I spent another day searching for information about Wangbian Electric in multiple dimensions, and I really found some clues, which made me slowly calm down.

1) The company actually landed on the New Third Board in 15 years, and President Wang also invested in him, but it was delisted from the New Third Board three years later.

2) The quality of the company's products is doubtful. The company has suspended the bidding qualification for 12 months because of the quality problems of transformers and complete sets of electrical equipment, and the prospectus also suggests that the company may have the risk of backward equipment. In addition, the prospectus also pointed out that "the company's revenue from restricted products in each period of the reporting period from 2019 to 2021 accounted for 8.63%, 10.54% and 8.71% of the issuer's current operating income respectively", and restricted products refer to products with backward technology. The above content shows that the company's power transmission and transformation business has the problem of backward technology, which is a very serious problem, and the company is also in technological transformation.

3) The performance of oriented silicon steel is limited by production capacity. Although the compound growth rate of the company's oriented silicon steel revenue is 48.93%, the compound growth rate contributed by sales growth is 32%, and the compound growth rate contributed by price growth is 18.93%, so the increase in revenue of oriented silicon steel is mainly affected by the increase in sales, and if the growth rate of capacity expansion slows down in the future, then the performance will be affected.

4) The company's bargaining power for the downstream is not strong. Some investors asked questions on the company's interactive platform, saying that the company's oriented silicon steel sold at a price lower than the market price. So, I thought about it in combination with the current situation of the company, and the reasons were clear at a glance. 1) The company's competitors are all strong state-owned enterprises such as Baosteel and Shougang, and if they are sold at the same price, they have no advantage. 2) The company's domestic customers in the silicon steel sector mainly include Chint Electric, Guangdong Shunte, TBEA, Jinpan Technology, Xidian Group, Nanrui Borui, etc.; Overseas customers mainly include POSCO International in South Korea, Hyosung Tianxi in South Korea, MARUBENIITOCHUSTEELINC, Tromener Jiyatirimlaria. S, Toyota Tsusho of Japan. The downstream customers themselves are strong, and the company is small and still lacks bargaining power.

Wangbian Electric's silicon steel process is very good, using a low-temperature heating cold rolling method, which is characterized by low production cost, strong product competitiveness and high technical barriers. For a long time, only Baosteel and Shougang have mastered the technology of producing high magnetic induction oriented silicon steel by low-temperature heating and one-time cold rolling, while Wangbian Electric and Valin Iron and Steel have become enterprises with the ability to produce high-magnetic induction oriented silicon steel by low-temperature heating one-time cold rolling method after Baosteel and Shougang through joint research and development.

I'm also looking at this lookout electrical, but I don't want to cater to your optimistic point of view, you need to have some facts and reasoning rather than lifting the bar to hammer and temper your logic and also feedback to me so that I can also beat my own logic, so as to improve the overall perception of this company, I hope you don't understand my reply as raising the bar, because I also need your knocking, everyone has some perspectives, a comprehensive review can restore the most objective and complete original appearance of things, and at the same time distinguish between the main contradiction and the secondary contradiction, For example, some of the flaws I see in my eyes may directly affect the decision to give up or hold, and in your more comprehensive understanding, the problems I see are just minor contradictions, and you can't abandon the generals of the dry city for the sake of eggs.

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