\u3000\u3 Guocheng Mining Co.Ltd(000688) 059 Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) )
The production capacity is climbing quarter by quarter, and the company's performance is growing rapidly
The company issued a performance express. In 2021, it achieved a revenue of 485 million yuan, a year-on-year increase of + 55.5%, a net profit attributable to the parent of 162 million yuan, a year-on-year increase of + 82.4%, and a net profit not attributable to the parent of 152 million yuan, a year-on-year increase of + 72.4%, which was in the median value of the previous performance forecast period. Among them, the single quarter revenue of 2021q4 was 126 million yuan, with a year-on-year increase of + 38%. Under the influence of limited films, the month on month increase of 2021q3 was still close to the same, and the net profit attributable to the parent company was 40.58 million yuan, with a year-on-year increase of + 47% and a month on month increase of - 15%, mainly due to the non recurring profits and losses such as government subsidies, which were mainly recognized in 2021q3.
The profitability was improved and the expense rate decreased under the scale effect
In terms of profitability, we expect that the net profit margin attributable to the parent company in 2021 will reach 33.4%, with a year-on-year increase of + 4.9pct, which is still significantly improved against the background of rising raw material costs, mainly due to 1) the strong bargaining power of the company's products, which can transfer the pressure of rising costs to the downstream; 2) Under the scale effect, all expense rates decreased in varying degrees; 3) IPO listing reduces the financial expense rate, while government subsidies bring non recurring profits and losses of 10.03 million yuan.
Orders continue to be full, and the release of high-end production capacity will usher in a simultaneous rise in volume and price
With the resumption of work and production after the festival and the recovery of downstream demand, the demand of the cutting tool industry has been strong since the beginning of 2022. At present, the production schedule of the company is from January to February (2021q4 is 1 month +), the orders are full, and the monthly output climbs to 8 million pieces / month. At the same time, with the completion of the plant and the landing of the equipment, the company's IPO raised investment project will start mass production from August to September, which is expected to contribute 7-8 million pieces of new high-end production capacity in 2022, and 30 million pieces of new high-end production capacity will be achieved in 2023. The unit price of this part of high-end blades is expected to increase by more than + 50% compared with the original production capacity. In addition, the production capacity of 5 million cermet blades and 2 million hardened cutting tools will also be put into operation in 22 years and gradually climb.
The company's convertible bond project was approved on February 23, 2022, and the raised funds shall not exceed 400 million yuan (including this amount), which will be used for the construction of precision CNC tool body production line, high-efficiency drilling tool production line and supplementary working capital. The two major projects are expected to install equipment by the end of 2022 and release capacity in 2023. It is expected to produce 500000 precision CNC cutter bodies and 1.4 million high-efficiency drilling cutters every year after the completion of production, with a total annual income of 408 million yuan and a net profit of 115 million yuan.
Domestic private cutting tool leaders are expected to benefit from the general trend of import substitution
With the deepening of import substitution, the recognition of domestic large terminal enterprises for domestic tools has gradually increased. We believe that the demand for domestic tools will continue to be optimistic. In the long run, with the continuous improvement of CNC rate of machine tools and the upgrading of consumption in the cutting tool market in China, the prosperity of the industry has a strong continuity. As the leader of domestic private cutting tools, the company is expected to benefit from the general trend of domestic substitution.
Profit forecast and investment rating: the company is in a period of rapid development. We expect the net profit attributable to the parent company from 2021 to 2023 to be 1.62 (down 1%) / 2.15/280 billion yuan, corresponding to 38 / 28 / 22 times of the current share price PE respectively, maintaining the "overweight" rating.
Risk warning: the downstream demand is less than the expected risk; Raw material price fluctuation risk.
