\u3000\u3 Bohai Water Industry Co.Ltd(000605) 123 Wuxi Paike New Materials Technology Co.Ltd(605123) )
Event: the company released its 2021 annual report. In 2021, the company achieved revenue (1.733 billion yuan, year-on-year + 68.65%), net profit attributable to the parent (304 million yuan, year-on-year + 82.59%), and net profit not attributable to the parent (about 286 million yuan, year-on-year + 91.14%). In a single quarter, 2021q4 company achieved revenue (542 million yuan, year-on-year + 81.89%, month on month + 26.97%), net profit attributable to parent company (91 million yuan, year-on-year + 103.15%, month on month + 25.84%) and net profit not attributable to parent company (87 million yuan, year-on-year + 129.64%, month on month + 27.06%).
Income statement: from the perspective of revenue, the company’s revenue in 2021 (1.733 billion yuan, year-on-year + 68.65%) is mainly due to the significant increase in the demand for Aerospace Forgings and forgings for photovoltaic crystal smelting furnace. From the perspective of profitability, in 2021, the company achieved gross profit margin (29.00%, year-on-year -0.51pct), in which the manufacturing cost rate of forging products increased by 1.48pct year-on-year; The net interest rate was 17.54%, year-on-year + 1.34pct, of which the sales / management / financial expense rate decreased by 0.45/0.65/0.22pct respectively year-on-year.
1) Aerospace Forgings: in 2021, the company achieved revenue (716 million yuan, + 117.77%), production (263054 tons, + 5.78%) and sales (256219 tons, + 22.41%). As one of the core suppliers of Military ring forgings in China, the company benefited from the large-scale growth of Aeroengine, aerospace missile and other equipment. The gross profit margin will be realized in 2021 (46.21%, year-on-year + 3.87pct). In addition, from the cost side, the cost of materials increased in 2021, and direct materials accounted for the proportion of revenue (79.46%, year-on-year + 1.44pct).
Aviation business: the company’s products cover almost all military aircraft launch models in service and in the research stage, which will fully benefit from the high-profile atmosphere of China’s military aircraft launch track. The civil products company signed 11-year and 5-year agreements with Luo Luo and Ge respectively in 2020, covering a variety of aircraft models. In 2021, Luo and GE’s orders continued to advance. At present, the first article development of multiple part numbers has been started, And received some batch production orders.
Aerospace business: the company’s products include missile engine case, missile shell, ring connector, rocket engine case, rocket fairing, etc. it has in-depth cooperation with Aerospace Hi-Tech Holding Group Co.Ltd(000901) , science and industry group, and participated in the supporting of long march series rockets and multi-type missiles. As a consumable equipment, the missiles in the 14th five year plan will be equipped more frequently, adding that China’s aerospace rockets are launched more and more frequently, It is expected to drive the rapid growth of forgings in the aerospace field of the company. In 2021, the company successfully passed the supplier review of an Institute of Aerospace Hi-Tech Holding Group Co.Ltd(000901) group, participated in the development and docking of a new generation of manned rocket project, and laid a foundation for subsequent engineering support.
2) forgings for petrochemical industry: in 2021, the company achieved revenue (522 million yuan, + 96.99%), production (2988720 tons, + 64.55%), sales (3076844 tons, + 69.47%), and gross profit margin (17.27%, a year-on-year decrease of 2.3 percentage points). The demand for flanges, tubesheets, etc. for petrochemical forgings supporting various equipment has remained generally stable, resulting in almost doubling of the revenue of this sector, which is due to the significant growth in the sales of forgings for photovoltaic crystal smelting furnace. It is expected that in the next two years, due to the supply bottleneck of silicon material, the photovoltaic industry will continue to increase the production capacity of silicon material, and the demand for crystal smelting furnace will increase significantly, Therefore, the company’s orders for forgings for crystal smelting furnace will grow rapidly.
3) forgings for electric power: in 2021, the revenue (172 million yuan, – 32.41%), production (1715606 tons, – 45.49%), sales (1818678 tons, – 35.53%) and gross profit margin (13.41%, a year-on-year decrease of 16.1 percentage points) will be realized. Electric forgings are used for steam turbines and gas turbines for thermal power, nuclear power components, wind turbines and other equipment. In the nuclear power market, the company has successfully obtained the civil nuclear safety production license, which has laid a solid foundation for further expanding the nuclear power market; In the wind power market, the company has successfully obtained the CE certification of wind power, and will increase efforts to invest in the development of wind power products. Forgings for wind power and nuclear power are in the stage of market expansion in 2021. In the future, with the restart of the approval of the nuclear power industry and the rapid development of the wind power industry, the business is expected to grow rapidly.
4) R & D expenses: 79 million yuan was invested in R & D in 2021, with a year-on-year increase of 83.59%, mainly due to the increase in R & D investment in aerospace, new energy and other products, which also shows that the company continues to layout R & D and products in the emerging and rapid growth direction, so as to continue to bring new performance growth points.
Balance sheet and cash flow statement: at the end of 2021, the company’s inventory was 499 million yuan, an increase of 77.02% over the beginning of the year, mainly due to the increase of raw material preparation and products in process during production due to the increase of orders; Accounts payable increased by 53.05% over the beginning of the year, indicating an increase in raw material procurement and outsourced processing; Accounts receivable increased by 32.22% year-on-year, mainly due to business growth; Fixed assets increased by 103.28% year-on-year, mainly due to the conversion of equipment from raised investment projects to fixed assets. The net cash flow from operating activities in 2021 was 6.09 million yuan, a year-on-year decrease of 54.10%, mainly due to the year-on-year increase of 59.8% in net cash flow from sales of goods in 2021, while the cash paid for purchasing goods and receiving labor services increased by 86.35% year-on-year, so the inventory increased significantly year-on-year.
Investment suggestion: as the core supplier of ring forgings in China’s aviation, missile and other fields, the company’s performance has increased significantly year-on-year and month on month, which may indicate the high-profile bearing of China’s aviation, missile and track. We believe that during the “14th five year plan” period, the company will maintain high growth in the field of aviation and missile forgings, while the forgings in the fields of petrochemical and electric power are expected to maintain stable growth. In addition, as a typical civilian military enterprise, the company has flexible mechanism and is actively arranging new energy and other fields, which is expected to open more growth poles. We expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 454 million, RMB 628 million and RMB 828 million respectively, corresponding to PE of 30.2x, 21.8x and 16.6x, maintaining the “buy” rating.
Risk warning: the demand of downstream industries is less than expected; The release of raised investment capacity was less than expected.
