\u3000\u3 Guocheng Mining Co.Ltd(000688) 308 Oke Precision Cutting Tools Co.Ltd(688308) )
Core view: the attribute of tool consumables is obvious, which is a barometer of manufacturing industry. With the continuous upgrading of domestic cutting tool market, the demand for domestic cutting tool and downstream technology has increased by about 40 billion. At present, the market scale of domestic cutting tool has been stable. The competition pattern of the cutting tool market is pyramid shaped, and the domestic brand has great potential. China's leading enterprises are the backbone to promote domestic substitution Oke Precision Cutting Tools Co.Ltd(688308) as the second largest supplier of cemented carbide CNC cutting tools in China, it was selected into the list of the third batch of specialized and new "little giants" announced by the Ministry of industry and information technology in July 2021. The four advantages of brand, channel, technology and production capacity help the development of the company. In 2022, with the new production capacity put into operation, the company entered a rapid growth period.
The consumption scale of cutting tools continued to expand, and the demand of the industry increased steadily
At present, the scale of China's cutting tool consumption market is about 40 billion yuan, and the scale of cutting tool market continues to expand driven by three factors. (1) Domestic substitution: from 2015 to 2020, the proportion of imported cutting tools decreased from 37% to 31%, and the dependence on imports decreased year by year. The year-on-year decrease of 3.5pct in 2020 is obvious, the domestic substitution process in the tool market is accelerated, and the domestic tool brand ushers in the golden development period. (2) Technology upgrading: the CNC rate of machine tools in China is about 40%, which still has great room for improvement compared with 80% in overseas developed countries. The increase in the NC rate of machine tools will drive the increase in the proportion and demand of NC tools. (3) Demand Alternation: cutting tools are widely used downstream. The alternation of different downstream demands such as aerospace and new energy will drive the continuous improvement of cutting tool market demand.
Chinese head manufacturers will show their edge in early 2021, and domestic tool substitution will continue to deepen in 2022
The competition pattern of China's cutting tool market presents a pyramid, with great potential for domestic brands. The leading enterprises are the backbone to promote domestic substitution. (1) Great potential of domestic brands: the high-end field of Chinese cutting tools is controlled by large multinational companies such as Sandvik. There is broad space for domestic substitution and great potential of domestic brands. (2) At that time, China's leading manufacturers are beginning to show their edge: some products of China's leading enterprises such as Zhuzhou Diamond, Oke Precision Cutting Tools Co.Ltd(688308) , Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) and so on have reached the international advanced level. The improvement of product strength is superimposed with policy support, and the domestic substitution of cutting tools is at that time. In 2021, China's production capacity will be fully released, downstream acceptance will be improved, and domestic brands will initially show their edge. In 2022, the process of production expansion will be further accelerated, and domestic substitution will continue to deepen.
The four advantages of technology, brand, channel and production capacity help the development of the company, and the IPO raised investment projects are put into operation to enhance their competitive strength
The company has been deeply engaged in the cutting tool industry for a long time, and has established four advantages of technology, brand, channel and production capacity to help the development of the company.
① brand: the company is the largest manufacturer of serrated blades in China and the second largest supplier of cemented carbide CNC cutting tools in China. It is deeply recognized by customers and has high brand value. In July 2021, it was selected into the list of the third batch of specialized and new "little giant" enterprises publicized by the Ministry of industry and information technology.
② Technology: on the one hand, the company has gathered an experienced and technologically mature R & D team. By the end of 2020, the company's technical personnel account for 13.3%. The internal core technical personnel are in important positions. At the same time, the company continues to strengthen in-depth cooperation with Chinese universities, create a good external R & D environment, and improve the level of technical R & D both at home and abroad. On the other hand, the company's core technology has reached the advanced level of the industry and continues to increase R & D investment. In 2020, the company's R & D expenditure accounted for 4.72% of its revenue, accounting for a relatively high proportion. Speak with technology to enhance the competitiveness of the company's products.
③ sales: multiple sales modes are parallel, and the sales channels are continuously expanded. On the one hand, direct selling and distribution go hand in hand. While consolidating and maintaining old customers, we continue to explore new customers of CNC cutting tools, establish a multi-level and wide coverage customer network, grow and develop together with channels, and expand sales channels. On the other hand, customers are stratified, and diversified expansion strategies are adopted for customers at different levels and regions, resulting in the continuous increase of customer groups.
④ production: on the one hand, continue to expand production capacity and seize development opportunities. In 2021, the company's production capacity increased more than expected (mainly due to the successful production of the second phase of the company's Yanling annual output of 20 million NC cutting tools project in the first half of the year, and the production capacity climbed smoothly). In 2022, the company's IPO raised and invested 40 million NC cutting blades project was put into operation, further expanding the production capacity and enhancing its competitive strength. On the other hand, expand product categories through the construction of industrial parks and improve the overall solution ability of the company.
Investment suggestion: we expect the company's revenue from 2021 to 2023 to be 1.053 billion yuan, 1.298 billion yuan and 1.564 billion yuan respectively, with a year-on-year growth rate of 50.00%, 23.21% and 20.55% respectively; The net profit was 223 million yuan, 289 million yuan and 372 million yuan respectively, with a year-on-year growth rate of 107.83%, 29.18% and 29.09% respectively; The corresponding PE is 27.8, 21.5 and 16.7x respectively. The target price of 80.92 corresponds to 28 times the valuation in 2022, maintaining the "Buy-A" rating.
Risk tip: the market competition intensifies, the domestic substitution process is less than expected, and the manufacturing industry is declining.
