2022-01-17 Tianfeng Securities Co., Ltd. Bao Rongfu, Wang Tao, and Wang Wen conducted research on Dongfang Yuhong and published the research report “Strong increase in net profit, highlighting the true character of the leader”. This report gave Dongfang Yuhong a buying rating, believing that its target price is 62.40 yuan. The current stock price is 48.28 yuan, and the expected increase is 29.25%.
Dongfang Yuhong (002271)
The company's net profit for the year 21 is expected to be 4.19 billion yuan, up 23.5% year on year
The company released the 21-year performance report, achieving full-year revenue of 31.89 billion yuan, a year-on-year increase of 46.8%, net profit of 4.19 billion yuan, a year-on-year increase of 23.5%, of which Q4 achieved revenue of 9.21 billion yuan, a year-on-year increase of 36.4%, net profit of 1.51 billion yuan, a year-on-year increase of 19.8%, and net profit for the whole year/Q4 quarter was 38.9/1.42 billion yuan respectively, up 25.7%/33.9% year on year. On November 9, the company issued an announcement to repurchase shares for later implementation of employee stock ownership plans or equity incentives. The total capital is 1-2 billion yuan, and the price does not exceed RMB 55.79 per share. The estimated number of shares to be repurchased is about 1792-35.85 million shares, accounting for about 0.71%-1.42% of the total share capital. The implementation period of share repurchase is no more than 12 months from the date the company's board of directors deliberates and approves this share repurchase plan. The company's large repurchases demonstrate firm confidence in medium- to long-term development.
The market share of waterproofing has further increased, and the development of coatings and retail businesses has improved
The company's revenue for the year 21 increased by 46.8% year-on-year, with Q4 revenue of 9.21 billion yuan in a single quarter, an increase of 8.96% over Q3. This is mainly due to: 1) With the continuous upgrading of demand for construction quality from downstream customers, the company's product quality, service, brand and other advantages have been highlighted. By increasing channel decline, market share has further increased, and material sales have grown rapidly year-on-year, while construction business revenue has increased; 2) Relying on the synergy of customer resources and sales channels that the main waterproofing industry has accumulated over the years, the revenue of the non-waterproof business sector represented by architectural coatings has increased rapidly; 3) The continuous decline in retail channels and category expansion, and the company's civil construction group's business development is good. The 21H2 waterproofing industry has been greatly affected by the decline in new real estate construction. We judge that the subsequent recovery on the real estate policy side is expected to gradually shift to the fundamental side. Front-end real estate data may have bottomed out starting in 22Q2. At the same time, new waterproofing regulations are nearing implementation, and rapid growth in rooftop photovoltaics is also expected to bring additional volume.
Net interest rates declined slightly year over year, and are expected to pick up in '22
The company achieved a net profit margin of 13.1% in '21, a year-on-year decline of 2.5 pct, mainly due to rising raw material asphalt prices. Net interest rates were under pressure. We calculated that asphalt prices increased by nearly 20% year on year. However, the company relieved some upward pressure on costs by strengthening opportunistic procurement of raw materials, cost control, and continued efficiency of scale, and profitability remained industry-leading. We judge that the current price of raw materials may be at a high level, but as the year-end price adjustment window approaches, product price adjustments are expected to be gradually implemented.
The diversified layout continues to advance and maintain the “buy” rating
We believe that with the increasing concentration of downstream customers and the strengthening of superimposed brands, services, channels, and cost advantages, the company's market share in the waterproofing industry is expected to continue to increase. At the same time, the company is also at the forefront of the industry in diversified business layouts such as civil building materials, coatings, insulation, mortar, repairs, and new energy. According to the performance report data, we adjusted the net profit forecast for 21-23 to 41.9/52.5/6.45 billion yuan (previous value was 43.1/54.7/6.88 billion yuan). Referring to the 23.2 times average PE of comparable companies in '22, considering the company's leading position and rapid expansion of new business, we approved the company's 30 times PE in '22, with a target price of 62.4 yuan, maintaining a “buy” rating.
Risk warning: New real estate starts are lower than expected, asphalt prices have rebounded sharply, and cash flow has deteriorated sharply. The performance forecast is the preliminary calculation results. The specific financial data is subject to the company's disclosure announcement.
The stock has been rated by 23 institutions in the last 90 days, with 21 purchase ratings and 2 increase ratings; the average institutional target price for the past 90 days is 64.67; according to the Securities Star valuation analysis tool, Dongfang Yuhong (002271) has a good company rating of 4 stars, a good price rating of 2.5 stars, and an overall valuation rating of 3.5 stars. (Rating range: 1 to 5 stars, maximum 5 stars)