The performance of Shareate Tools Ltd(688257) 21 was slightly lower than expected, and the expansion of production in 22 years helped the performance growth

\u3000\u3000 Shareate Tools Ltd(688257) (688257)

Core view:

Investment Event: Shareate Tools Ltd(688257) released the performance express of 2021. During the reporting period, the company achieved an operating revenue of 894 million yuan, a year-on-year increase of 22.49%, and a net profit attributable to the owner of the parent company of 136 million yuan, a year-on-year increase of 19.31%.

Affected by factors such as plant relocation and rising prices of raw materials, the performance growth in 2021 is slightly lower than expected. According to the company’s performance express, the company achieved an operating revenue of 894 million yuan in 2021, a year-on-year increase of 22.5%, and 227 million yuan in a single quarter in the fourth quarter, a year-on-year increase of 12.5%, lower than the revenue growth rate of 26.4% in the first three quarters. We believe that the decline in revenue growth in the fourth quarter is mainly due to the dual control of energy consumption and plant relocation. In terms of net profit, the company realized a net profit attributable to the parent company of 136 million in 2021, with a year-on-year increase of 19.3%, lower than the income growth. Mainly due to the rise in the price of raw materials and the appreciation of RMB, the gross profit margin of the company’s flagship product cone bit was affected to a certain extent.

The expansion of production in 2022 will boost performance growth. Shareate Tools Ltd(688257) in October 2021, the science and technology innovation board went public with an IPO, raising a net fund of 1.35 billion yuan, mainly invested in cemented carbide products, cone bit construction and other projects. The cemented carbide products construction project, one of the raised investment projects, has been officially put into operation. By the end of 2021, the company’s original Suzhou bar production line and Qianjiang mining alloy production line have been relocated to Wuhan. After the project is completed, the company’s cemented carbide products will be expanded to 1600 tons / year. The cone bit construction project is expected to be put into operation in the second half of this year. Benefiting from overseas mining investment and the improvement of infrastructure investment under China’s steady growth, the downstream demand for cone bits and cemented carbide products is stable and upward, and the orders of the company’s core products are full. The expansion of production will help to solve the company’s capacity bottleneck, improve the market share and boost the growth of performance.

Mining cone bit leader, the acquisition cut into the field of CNC cutting tools. Shareate Tools Ltd(688257) it is mainly engaged in the R & D, production and sales of cemented carbide and tools. The market share of mining cone bit, the fist product, ranks first in China, third in Australia and South America, and the output of cemented carbide ranks first in China. The company’s strategic positioning is the integrated platform of cemented carbide industry chain, and endogenous extension helps its development. In terms of endogenous, improve the production capacity and market share of existing products, and expand new products + new markets + new regions. In terms of extension, it plans to acquire and increase the capital of Zhuzhou Weikai to enter the CNC blade industry.

Profit forecast and investment suggestions: in combination with the company’s performance express, we adjusted the predicted value of the company’s net profit attributable to the parent company in 2021 to 136 million yuan. Based on the rhythm of the company’s production expansion and the impact of Weikai’s consolidated statement, we adjusted the predicted value of the company’s net profit attributable to the parent company in 2022-2023 to 204 million and 276 million yuan, with corresponding EPS of 1.46, 2.20 and 2.98 yuan and corresponding PE of 39, 26 and 19 times, Maintain recommended ratings.

Risk tip: the ramp up speed of production capacity is lower than the market expectation, the market promotion of new products is lower than the expectation, the market competition intensifies, and the risk of acquisition and integration.

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