2022-01-17 Li Yang of Minsheng Securities Co., Ltd. conducted a research on Dongfang Yuhong and issued a research report "comments on company events: the incentive target is expected to be successfully completed, and both non-housing and non-defense contribute significantly". This report gives a buy rating to Dongfang Yuhong, the current stock price is 48.28 yuan.
Oriental Rainbow (002271)
Summary of events: the company recently released its 2021 results KuaiBao, 1 in terms of income, it is expected to achieve a total operating income of 31.892 billion yuan, year-on-year + 46.8% of the same period last year, and expected to achieve a net profit of 4.185 billion yuan, + 23.5% compared with the same period last year. Deducting non-return net profit of 3.885 billion yuan, year-on-year + 25.7%. Based on this, it is estimated that the company's 21Q4 realized a net profit of 1.507 billion yuan, + 19.8% compared with the same period last year, and 1.417 billion yuan after deducting non-return net profit, which was + 33.9% compared with the same period last year.
High growth in adversity, expected to meet the annual performance standards
In March 2021, the company issued an equity incentive plan, in which 2022 was unlocked under the condition that the net profit of deducting non-return in 2021 increased by 25% compared with the same period last year. According to the performance of KuaiBao, the net profit of deducting non-return in 2021 was + 25.7% compared with the same period last year. We expect the company to successfully achieve the incentive target. On the other hand, the company passed the "2021 Financial Budget report" in March 2021, proposing that the revenue budget target is 30 billion yuan and the net profit is 4.25 billion yuan. According to KuaiBao, the income has exceeded the budget (the net profit has not been disclosed). In 2021, there are great operational challenges, the decline of real estate land acquisition / new construction, the credit risk of real estate enterprises and the sharp rise in raw material prices, the company is still determined to complete the performance evaluation targets, highlighting the leading advantages. The area of new real estate starts fell 9.1% from January to November 2021 compared with the same period last year, and the decline accelerated in the second half of the year. Top real estate developers represented by Evergrande and R & F frequently expose the risk of credit default and expand the receivable risk exposure of upstream material enterprises, which forms great pressure on the industry chain as a whole. In addition, the annual average of asphalt, acrylic acid and VAE increased by 19.8%, 55.7% and 84.4% respectively compared with the 2020 average. Raw materials such as asphalt accounted for 80-90% of the main business costs of the waterproofing industry, and the annual gross profit margin is expected to remain under pressure.
The material and construction scale are growing at the same time, and the contributions of non-housing and non-prevention are obvious.
The integrated company system established at the end of 2020 has achieved remarkable results, overlaying the national layout of production capacity, fully sinking the tunnel of excavators in 2021, and accelerating the expansion of the non-housing market to effectively resist the pressure of real estate. In recent years, the highly concerned non-waterproof business continues to grow at a high rate, represented by architectural coatings, such as thermal insulation mortar, powder, diatomite, ceramic tile glue, sewing agent and other related materials, and accelerate the extension of waterproofing and construction and repair services. the progress of platform management structure is better than expected. In addition, brand spillover, retail channels benefit, and the business of China Construction Group develops well at the same time.
The concentration of the industry in the downward period is expected to accelerate, and the effect of bid raising is worth looking forward to.
With the mid-2021 waterproofing income / industry regulation enterprise income, the company's market rate is 25%, and there is still much room for improvement in industry concentration. According to the General Code for Building and Municipal Engineering (draft for soliciting opinions) put forward by the Ministry of Housing in 2019, there are detailed regulations on the service life of waterproof materials and the number of painting layers. If the new rules are approved and implemented, we expect to kill three birds with one stone: to improve the capacity, quality and concentration of the industry, and the promotion effect is worth looking forward to.
Investment advice:
We estimate that the return net profit from 2021 to 2022 will be 41.7 yuan and 5.27 billion yuan respectively, and the stock price corresponding to PE on January 14, 2022 will be 29X and 23x respectively. Maintain the recommended rating.
Risk Tips:
Changes in raw material prices were less than expected; risks of continued tightening of real estate policies; and lower-than-expected municipal and infrastructure investment.
A total of 23 agencies have rated the stock in the last 90 days, including 21 buy ratings and 2 overweight ratings; the average institutional target price in the past 90 days is 64.67; according to the Securities Star valuation analysis tool, Dongfang Yuhong (002271) good company has a rating of 4 stars, a good price rating of 2.5 stars and a comprehensive valuation rating of 3.5 stars. (rating range: 1-5 stars, up to 5 stars)