\u3000\u3 Guocheng Mining Co.Ltd(000688) 059 Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) )
Key investment points
Event: the company released the performance express for 2021. In 2021, the company realized an operating revenue of 485 million yuan, an increase of 55.5% year-on-year; The net profit attributable to the parent company was 162 million yuan, an increase of 82.4% year-on-year. The company’s performance has increased rapidly, which is in line with our expectations.
The demand for domestic cutting tools increased, the company accelerated the expansion of production capacity, and the annual performance increased rapidly. On the demand side, the downstream industry boom and the demand for industrial cutting tools increased significantly in 2021; The epidemic has affected the supply of medium and high-end CNC blades in Europe, America, Japan and South Korea in China, and the willingness of end users to choose domestic blades has increased; On the supply side, the performance of the company’s products has been improved, the production capacity of NC blades has been greatly expanded, the sales volume of NC blades has increased significantly, and the company’s performance has achieved rapid growth.
Actively expand product categories and continuously improve the company’s comprehensive supporting service capacity. The company plans to issue convertible bonds to raise 400 million yuan to expand the production capacity of 500000 precision CNC tool bodies and 1.4 million high-efficiency drilling tools. Combined with the cermet blades and integral milling tools built with the company’s IPO funds, the company’s product series has been continuously expanded, the comprehensive service capacity has been continuously improved, and the competitiveness of products and services has been steadily enhanced, It is expected to become a world-class comprehensive service provider of cutting tools.
The supply side and the demand side promote the import substitution of domestic cutting tools at the same time. Industrial cutting tools, as consumables in the production process of manufacturing industry, have an important impact on the quality and performance of products processed and produced. The leading Chinese cutting tool enterprises represented by Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) take medium and high-end cutting tools as the development goal, strive to continuously improve the cutting tool performance and service capacity, and lay a foundation for the import substitution of domestic cutting tools at the supply side; From the demand side, the price of imported tools is high. On the basis of improving the performance of Chinese tools, downstream customers have the demand to reduce their production costs by using domestic tools.
Profit forecast and investment suggestions. It is estimated that the net profit attributable to the parent company from 2021 to 2023 will be RMB 163 million, RMB 234 million and RMB 333 million respectively, and the compound growth rate of net profit attributable to the parent company in the next three years will be 55.2%. Considering the high technical barriers of products, the acceleration of domestic substitution and the high performance of the company, and the strong certainty of growth rate, we should enjoy the valuation premium, give 35 times PE in 2022, target price 185.85 yuan, and maintain the “buy” rating.
Tips: the risk of manufacturing investment has declined significantly; The company’s capacity expansion is lower than expected; The competition pattern of the industry has deteriorated.
