\u3000\u3 Bohai Water Industry Co.Ltd(000605) 123 Wuxi Paike New Materials Technology Co.Ltd(605123) )
On March 15 Wuxi Paike New Materials Technology Co.Ltd(605123) released the annual report for 2021. In 2021, the company achieved an operating revenue of 1.733 billion yuan, an increase of 68.65% year-on-year; The net profit attributable to the parent company was 304 million yuan, a year-on-year increase of 82.59%; Deduct 286 million yuan of net profit not attributable to parent company, with a year-on-year increase of 91.14%; The basic earnings per share is 2.82 yuan. The company plans to distribute a cash dividend of RMB 2.88 (including tax) for every 10 shares to all shareholders, with a total of RMB 31.104 million. No shares will be given and no accumulation fund will be converted into share capital.
The revenue of military forgings increased by 117.17%, contributing 65.81% of gross profit
In 2021, the company achieved an operating revenue of 1.733 billion yuan, a year-on-year increase of 68.65%; The net profit attributable to the parent company was 304 million yuan, a year-on-year increase of 82.59%; The net profit deducted from non parent company was 286 million yuan, with a year-on-year increase of 91.14%. The performance increased rapidly, slightly exceeding expectations.
In 2021, the sales of Aerospace Forgings reached 716 million yuan, a year-on-year increase of 117.77%; The sales of petrochemical forgings reached 523 million yuan, a year-on-year increase of 96.99%,; The sales of electric forgings reached 172 million yuan, a year-on-year decrease of 32.41%; Other forgings (mainly including ships, machinery, weapons, forging and other industries) sold 142 million yuan, a year-on-year increase of 57.29%. The operating revenue of military forgings and petrochemical forgings increased significantly. The revenue of military forgings has accounted for 41.31% of the operating revenue and 65.81% of the company’s gross profit, which has become the main source of the growth of the company’s operating revenue and net profit.
In 2021, a total of 6608935 tons were sold, with a year-on-year increase of 13.78%. Among them, the sales volume of military forgings was 2562 tons, with a year-on-year increase of 22.41%, that of petrochemical forgings was 30800 tons, with a year-on-year increase of 69.47%, that of other mechanical forgings was 14600 tons, with a year-on-year increase of 51.34%, and that of electric forgings was 18200 tons, with a year-on-year decrease of 35.53%.
The profitability of the company is gradually enhanced, but the operating cash flow is weak
In 2021, the gross profit margin of the company’s overall sales was 29.0%, a slight decrease of 0.51pct year-on-year; The net interest rate was 17.54%, with a year-on-year increase of 1.34pct, deducting 16.52% of non net interest rate, with a year-on-year increase of 1.94pct. The increase in net interest rate is mainly due to the faster growth of the company’s operating revenue of military forgings with high profit margin.
In 2021, the company’s weighted roe was 17.89%, an increase of 1.01pct over last year.
In 2021, the company’s net operating cash flow was 6.09 million yuan, a year-on-year decrease of 54%, and the company’s operating cash flow was weak. In 2021, the company’s accounts receivable and inventory increased rapidly.
The demand for military forgings has increased rapidly, and the company has fully benefited as a core supplier of Military ring forgings
Since its establishment, the company has focused on free forging and ring forging forming of various metal materials. It is one of the few specialized enterprises in the development and production of aviation ring forgings in China. It has participated in the development of many aviation engines and the application research of new materials in China. At the same time, it also provides aviation ring forgings and gearbox forgings for international well-known aviation engine manufacturers such as GE aviation and Rolls Royce.
Domestic aero-engine is one of the biggest weaknesses in China’s aviation industry, and it is also a weak link in urgent need of key breakthrough. With the gradual increase in the demand for the installation, replacement and maintenance of new fighter trains in China, the demand for domestic engines has increased significantly. During the 14th Five Year Plan period, the domestic aeroengine industry will usher in a period of rapid development, and the core suppliers of the engine industry chain will continue to benefit. As one of the core suppliers of engine ring forgings in China, the aviation forging business is expected to continue to maintain rapid growth during the 14th Five Year Plan period.
Profit forecast and valuation
We predict that the operating revenue of the company from 2022 to 2024 will be 2.281 billion, 2.925 billion and 3.707 billion respectively, the net profit attributable to the parent company will be 440 million, 596 million and 786 million respectively, and the corresponding PE will be 34.27x, 25.31x and 19.2x respectively. The valuation is reasonable, which matches the performance growth of the company in the next few years. It will be covered for the first time and given a “buy” rating.
Risk tips: 1: the development and production progress of domestic aeroengine is less than expected; 2: The growth rate of defense expenditure budget is lower than expected; 3: Rising prices of raw materials; 4: Industry competition intensifies.
