Oke Precision Cutting Tools Co.Ltd(688308) (688308)
Key investment points
Event: the company announced that it plans to invest 750 million yuan to build a new NC Tool Industrial Park, including a new R & D office building, and build a production line with an annual output of 1000 tons of high-performance bars, 3 million integral cemented carbide tools, 200000 sets of NC tools, 5 million pieces of cermet blades and 10 tons of cermet sawteeth.
The company has expanded its tool categories horizontally, and its ability to provide overall cutting solutions has been greatly improved. At present, the company has an annual production capacity of 60 million cemented carbide NC blades and a new production capacity of 40 million NC blades with raised funds through IPO. It has become a leading enterprise in China in the field of NC blades. The newly-built CNC Tool Industrial Park will expand the company’s tool business horizontally to 5 million pieces of cermet blades, 3 million pieces of integral cemented carbide tools, 200000 sets of CNC tools (cutter head and cutter body) and supplement the company’s short board, which will greatly enhance the ability of the company to provide overall cutting solutions and lay a solid foundation for the company to further replace tool products in Japan, South Korea, Europe and the United States.
Vertically expand the raw materials of hardened cutting tools and horizontally expand the category of serrated blades. Cemented carbide bar is the raw material for the production of integral cemented carbide tools. The company’s new high-performance bar project with an annual output of 1000 tons will help the company control the gross profit margin of integral cemented carbide tools, improve the profitability of integral cemented carbide tools, and ensure the performance of integral cemented carbide tools produced by the company. In addition, the company has also built a 10 ton cermet saw tooth production line according to the market demand, which is conducive to ensuring the company’s leading position in the field of saw tooth blades.
The consumption of cutting tools is expected to continue to grow, and the substitution of domestic imports is advancing steadily. As consumables in the manufacturing process, industrial cutting tools have an important impact on the quality and performance of products processed and produced. With the steady upgrading of China’s manufacturing industry and the continuous improvement of the penetration rate of CNC machine tools, the consumption scale of industrial cutting tools has increased steadily. It is expected to reach about 50 billion yuan in 2021, with a year-on-year increase of nearly 20%. Moreover, with the continuous improvement of tool performance and service capacity of Chinese tool enterprises represented by Oke Precision Cutting Tools Co.Ltd(688308) , the replacement import of domestic tools has become a deterministic trend. In 2020, the import volume of tools was 13.1 billion yuan, a year-on-year decrease of 3.7%, and the proportion of imported tools was 31.1%, a year-on-year decrease of 3.5 percentage points.
Profit forecast and investment suggestions. Oke Precision Cutting Tools Co.Ltd(688308) is the leading enterprise of CNC cutting tools and the leader of serrated blades. It is estimated that EPS will be 2.27, 2.99 and 3.92 yuan respectively from 2021 to 2023, and the compound growth rate of net profit attributable to parent company in the next three years will be 54.0%. Give the company a target price of 119.60 yuan and maintain the “buy” rating.
Risk tip: manufacturing investment has fallen sharply; The company’s capacity expansion is lower than expected; The industry competition pattern has deteriorated.
