\u3000\u3 Guocheng Mining Co.Ltd(000688) 059 Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) )
Event overview
The company released the performance express of 2021, and achieved an operating revenue of 485 million yuan in 2021, with a year-on-year increase of 55.51%; The net profit attributable to the parent company was 162 million yuan, a year-on-year increase of 82.41%; The net profit deducted from non parent company was 152 million yuan, with a year-on-year increase of 72.43%.
Analysis and judgment:
Many factors help the company’s performance growth. The company achieved an operating revenue of 126 million yuan in 2021q4, with a year-on-year increase of 38.46% and a month on month change of – 2.33%; The net profit attributable to the parent company was RMB 40 million, with a year-on-year increase of 42.86% and a month on month change of – 16.67%. 1) With the continuous improvement of the company’s product performance, the gradual release of production capacity and the continuous improvement of sales channels, the sales volume of products increased, which effectively promoted the growth of revenue. 2) The import business of some high-end CNC blades in Europe, America, Japan and South Korea has been hindered due to the covid-19 epidemic. The willingness of end users to choose domestic blades has been increasing, which has promoted the growth of the company’s revenue. 3) In 2021, the impact of non recurring profit and loss on net profit was 100345 million yuan, mainly due to government subsidies received by the company.
Production capacity continues to be released, and the proportion of high value-added products is expected to continue to increase. In the first three quarters of 2021, the company’s CNC blade output increased from 39.213 million in 2018 to 620734 million, with a production and marketing rate of 100.29% and a capacity utilization rate of 134.94%. The company’s IPO project is expected to gradually release production capacity from the second half of 2022 to 2023. At that time, the company will increase the production capacity of 30 million cemented carbide NC blades, 5 million cermet NC blades and 2 million cemented carbide overall tools. At the same time, the company plans to issue convertible bonds to raise funds for the construction project of precision CNC tool body production line (the annual production capacity of 500000 precision CNC tool body products), the construction project of high-efficiency drilling tool production line (the annual production capacity of 1.4 million high-efficiency drilling tools) and supplement working capital. It is expected to achieve an average annual operating income of 408 million yuan after reaching the production capacity, The net profit was 115 million yuan. By actively expanding production capacity + categories, the proportion of high value-added products is expected to further increase.
Benefiting from the accelerated superposition and concentration of import substitution, the company’s performance continued to benefit. In 2021, the market scale of the global cutting tool industry will reach 38 billion US dollars, and the consumption scale of cutting tools in China will be about 40 billion yuan, so the market space is huge. With the progress of China’s technology and the impact of covid-19 epidemic on overseas tool manufacturers, import substitution is expected to accelerate. On the other hand, with the increasing requirements of the market for tool products, some manufacturers with backward technology will be gradually eliminated, and the market concentration is expected to be further improved. The company is expected to continue to benefit under the background of import substitution and increased concentration.
Investment advice
The company’s performance is in line with our expectations. At the same time, with reference to the performance express, we slightly adjust the company’s profit forecast for 2021 and maintain the same profit forecast for 20222023. It is estimated that the revenue from 20212023 will be RMB 485 / 670 / 882 million respectively, the net profit attributable to the parent company will be RMB 162 / 224 / 301 million respectively, and the corresponding EPS will be RMB 3.69/5.09/6.84 respectively, corresponding to the closing price of RMB 138.9/share on February 26, 2022, PE was 38 / 29 / 20 times respectively, maintaining the company’s “overweight” rating.
Risk tips
Capacity expansion is less than expected; The downstream prosperity is lower than expected; Industry competition intensifies.
