\u3000\u3000 Oke Precision Cutting Tools Co.Ltd(688308) (688308)
Event: on January 20, the company released the performance forecast for 2021. It is estimated that the company’s net profit attributable to the parent company will reach 215 ~ 230 million yuan in 2021, with a year-on-year growth rate of 100.10% ~ 114.06%; Net profit deducted from non parent company was RMB 185 ~ 200 million, with a year-on-year growth rate of 79.62% ~ 94.19%.
Core view: performance meets expectations. The company’s performance growth rate increased significantly in 2021, mainly due to:
① the downstream demand is strong, the company’s production capacity has increased significantly, and the income side has achieved scale growth; ② Profitability was further strengthened, new product research and development, sales channels were improved, and the effect of fine management was outstanding;
③ investment income and government subsidies increased. In 2022, the company will continue to carry out capacity layout. With the new capacity put into operation, the company’s performance is expected to maintain sustained and stable growth. Oke Precision Cutting Tools Co.Ltd(688308) as the second largest supplier of cemented carbide cutting tools in China, it is the backbone to promote the domestic substitution of cutting tools. In the future, the company will rely on the accumulated advantages of brand, channel, technology and production capacity to achieve rapid development.
In 2021, the company achieved a growth in revenue scale and a significant increase in performance growth
From 2017 to 2020, the company’s operating revenue increased from 428 million yuan to 702 million yuan, CAGR = 17.90%; The net profit attributable to the parent company increased from 46 million yuan to 107 million yuan, CAGR = 34.08%. According to the forecast, the company’s net profit attributable to the parent company in 2021 increased by 100.10% ~ 114.06%, and the performance growth increased significantly, mainly due to the following reasons: ① the income realized scale growth, the downstream demand was strong, the company’s NC tool production capacity increased greatly, and the sales volume of cemented carbide products increased; ② The profitability was enhanced. The company further increased the research and development of new products, improved production efficiency, further improved sales channels, gradually increased the gross profit margin of products, and implemented fine management, resulting in a decrease in the cost rate. ③ Investment income and government subsidies increased. The perfect ending of 2021 indicates that the company’s early R & D and capacity investment have entered the harvest period.
The demand elasticity of cutting tools is greater than that of machine tools, and domestic brands have great potential
The market scale of cutting tools is nearly 40 billion, and there is still room for improvement. The properties of tool consumables are obvious, the replacement cycle is short, and the demand elasticity is greater than that of the whole machine tool. According to the statistics of machine tool association, the scale of China’s cutting tool market is nearly 40 billion, and China’s cutting tools account for 25% of machine tool consumption. Compared with 50% of developed countries, there is still room to improve the scale of China’s cutting tool market. The competition pattern presents a pyramid, and domestic brands have great potential. Some products of China’s leading enterprises such as Zhuzhou Diamond, Oke Precision Cutting Tools Co.Ltd(688308) , Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) have reached the international advanced level. The improvement of product power is superimposed with policy support, and the domestic replacement of cutting tools is at the right time. The high-end field of China’s cutting tools is controlled by large multinational companies such as Sandvik, with broad domestic substitution space and great potential of domestic brands.
The four advantages of technology, brand, channel and production capacity help the development of the company. The company has entered a rapid growth period. The company has been deeply engaged in the cutting tool industry for a long time, and has established four advantages of technology, brand, channel and production capacity to help the development of the company.
① Technology: on the one hand, the company has gathered an experienced and technologically mature R & D team, on the other hand, it continues to strengthen in-depth cooperation with Chinese universities, create a good external R & D environment, both inside and outside, and improve the level of technical R & D.
② brand: the company is the largest manufacturer of serrated blades in China and the second largest supplier of cemented carbide CNC tools in China. It is deeply recognized by customers and has high brand value.
③ channel: on the one hand, consolidate and maintain old customers, on the other hand, continuously develop new customers of NC cutting tools, establish a multi-level and wide coverage customer network, and grow and develop together with the channel.
④ production capacity: continue to expand production capacity and seize development opportunities. In 2021, the company’s production capacity increased more than expected. In 2022, the company increased the production capacity of 40 million NC blades, continued to expand in the follow-up, and the company entered a period of rapid growth.
Investment suggestion: we expect the company’s revenue from 2021 to 2023 to be 1.053 billion yuan, 1.298 billion yuan and 1.564 billion yuan respectively, with a year-on-year growth rate of 50.00%, 23.21% and 20.55% respectively; The net profit was 223 million yuan, 289 million yuan and 372 million yuan respectively, with a year-on-year growth rate of 107.83%, 29.18% and 29.09% respectively; The corresponding PE is 29.8, 23.1 and 17.9x respectively. We expect the six-month target price of the company to be 80.64, corresponding to 28 times the valuation in 2022. It is covered for the first time and is rated “Buy-A”.
Risk tip: the market competition intensifies, the domestic substitution process is less than expected, and the manufacturing industry is declining.
