CBGF(002478) 东方证券·2024-05-06 02:32Investment Rating - The report initiates coverage on Changbao Steel with a Buy rating, setting a target price of 8.80 RMB based on a 10X PE multiple for 2024 [1][2] Core Views - Changbao Steel specializes in producing small and medium-sized seamless steel pipes, with oil well pipes and boiler tubes as its main products, accounting for 64% and 25% of gross profit respectively in 2023 [11] - The company has a strong export presence, with overseas revenue contributing 39% of total revenue and 61% of gross profit in 2023 [66] - Downstream oil and gas capital expenditures (Capex) are expected to grow moderately, with Middle East drilling service Capex reaching 16 billion USD in 2023 and projected to rise to 19 billion USD by 2026, driving demand for oil well pipes [11] - The company is undergoing a high-end transformation, launching a 50,000-ton new energy vehicle precision pipe project and an 8,500-ton special materials project for new energy and semiconductors, with an estimated combined output value of 1.3 billion RMB upon completion [11][81] Financial Performance - In 2023, Changbao Steel reported revenue of 6.66 billion RMB, a 7% YoY increase, and net profit attributable to shareholders of 783 million RMB, a 66.2% YoY increase [20] - The company's ROE rebounded to 16% in 2023, up from below 5% in 2020 and 2021, driven by downstream demand recovery and new orders [11] - Gross margin improved to 18.8% in 2023, with oil well pipes and boiler tubes contributing significantly to profitability [20][41] Industry and Market Analysis - Global oil and gas Capex is expected to grow moderately, with offshore projects driving demand for high-end oil well pipes [72] - In 2023, China's coal power approvals exceeded 90GW for the second consecutive year, supporting sustained demand for boiler tubes [77] - The global oil well pipe market was approximately 9.6 million tons in 2023, with North America and China being the largest demand regions [46] Company Transformation and Growth - Changbao Steel has increased investment in equipment and R&D, with R&D expenses reaching a record high of 250 million RMB in 2023 [11][79] - The company's PQF production line, with a capacity of 300,000 tons, achieved full capacity utilization in 2022, contributing to revenue growth [27][109] - The company is expanding into new markets, developing 96 new customers in 2023, including 38 overseas clients [79] Valuation and Forecast - The report forecasts EPS of 0.88, 0.99, and 1.10 RMB for 2024-2026, with revenue expected to grow to 7.58, 8.25, and 8.61 billion RMB respectively [1][20] - The target price of 8.80 RMB is based on a 10X PE multiple, in line with comparable companies in the industrial pipe sector [138]