XINXING PIPES(000778) 华创证券·2024-04-10 16:00Investment Rating - The report downgrades the investment rating of Xinxing Ductile Iron Pipes (000778) to "Recommend" from a previous higher rating [4] Core Views - The steel industry faced challenges in 2023, with declining steel prices and high raw material costs, putting pressure on the company's profits [36] - Ductile iron pipes, the company's main product, contributed 30.87% of revenue and 50.62% of gross profit, up 2.27 percentage points from 2022, stabilizing the company's performance [36] - Despite industry headwinds, the company achieved a 3.8% increase in ductile iron pipe sales, with capacity utilization well above the industry average [36] - The company optimized its product structure, achieving a 100% sales-to-production ratio for steel products, and saw record production levels for pipe castings and steel grating [36] - Cost reduction and efficiency improvements contributed to a 23 yuan/ton increase in profit across four dimensions, with operating expenses reduced by 400 million yuan and financial expenses down by 40 million yuan [36] - The company's long-term prospects are supported by ongoing infrastructure development in water conservancy and municipal pipelines, though short-term challenges in steel demand may persist [36] Financial Performance - In 2023, the company reported revenue of 43.253 billion yuan, down 9.4% year-over-year, and net profit attributable to shareholders of 1.351 billion yuan, down 19.4% [5][12] - The company plans to distribute a cash dividend of 0.60 yuan per 10 shares, representing a dividend yield of 1.5% based on the closing price on April 10 [12] - For 2024-2026, the company is expected to achieve revenue of 45.136 billion yuan, 48.147 billion yuan, and 51.106 billion yuan, with year-over-year growth of 4.4%, 6.7%, and 6.1%, respectively [5][36] - Net profit attributable to shareholders is forecasted to be 1.444 billion yuan, 1.534 billion yuan, and 1.714 billion yuan for 2024-2026, with growth rates of 6.9%, 6.2%, and 11.8%, respectively [5][36] - The company's price-to-book ratio (P/B) is projected to be 0.6x, 0.6x, and 0.5x for 2024-2026, with a target price of 4.42 yuan based on a 0.7x P/B ratio for 2024 [36] Key Financial Metrics - The company's gross margin improved slightly, from 6.3% in 2023 to an expected 7.2% by 2026 [37] - Return on equity (ROE) is forecasted to increase from 5.3% in 2023 to 5.8% by 2026 [37] - The debt-to-equity ratio is expected to decline from 54.3% in 2023 to 50.6% by 2026, reflecting improved financial health [37] - Earnings per share (EPS) are projected to grow from 0.34 yuan in 2023 to 0.43 yuan by 2026 [37]