\u3000\u3 Guocheng Mining Co.Ltd(000688) 059 Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) )
Key investment points
Event: the company released its annual report for 2021, and achieved a revenue of 485 million yuan in 2021, with a year-on-year increase of 55.5%; The net profit attributable to the parent company was 162 million yuan, an increase of 82.4% year-on-year; Q4 achieved a revenue of 126 million yuan in a single quarter, an increase of 38.2% year-on-year and a decrease of 2.6% month on month; The net profit attributable to the parent company was 41 million yuan, a year-on-year increase of 47.0% and a month on month decrease of 15.0%. The company's performance increased rapidly in 2021, which was in line with expectations.
The downstream demand slowed down, and the revenue of Q4 decreased month on month in a single quarter; The price rise of products lagged behind that of raw materials, and the gross profit margin in Q4 decreased month on month. Due to power restriction and other factors, the demand of end customers decreased, combined with the clearance of inventory by dealers at the end of the year, the sales volume of cutting tools in Q4 decreased slightly, and the revenue decreased by 2.6% month on month. In 2021, the company's comprehensive gross profit margin was 50.3%, a year-on-year decrease of 0.6 percentage points; Q4 was 47.8% in a single quarter, with a year-on-year decrease of 3.8 percentage points and a month on month decrease of 4.1 percentage points. The main reasons for the decline in gross profit margin are as follows: 1) the price of raw materials such as tungsten carbide powder has increased significantly, and the price of 2021q2-q3 tungsten carbide powder has increased by about 12%, while the price rise of the company's products is relatively lagging behind; 2) The operating rate decreased and the scale effect decreased. With the price increase of the company's products and the improvement of the marginal demand, it is expected that the company's gross profit margin will gradually repair.
Throughout the year, the scale effect of the company was obvious, the expense rate decreased during the period, and the net interest rate increased significantly. In 2021, the company's expense ratio was 13.2%, a year-on-year decrease of 3.4 percentage points; Q4 was 13.9% in a single quarter, a year-on-year decrease of 2.2 percentage points and a month on month increase of 1.2 percentage points. In 2021, the company's net interest rate was 33.4%, with a year-on-year increase of 4.9 percentage points; Q4 was 32.2% in a single quarter, with a year-on-year increase of 1.9 percentage points and a month on month decrease of 4.7 percentage points.
Domestic substitution is progressing smoothly, and the sales volume of CNC blades of the company has increased significantly. In terms of internal factors, the performance of domestic cutting tools continues to improve and the production capacity is gradually released; From the perspective of external factors, covid-19 epidemic has hindered the import of high-end CNC blades in Europe, America, Japan and South Korea. Both internal and external factors have led to strong demand for domestic blades. The company sold 82.34 million CNC blades in 2021, with a year-on-year increase of 52.2%, and the domestic replacement was progressing smoothly.
Profit forecast and investment suggestions. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 229 million, 340 million and 447 million, with an average annual compound growth rate of 40.2%. The company is a leading enterprise of CNC cutting tools in China. It promotes domestic replacement of cutting tools and has high medium and long-term growth. It gives 35 times PE in 2022 and the target price is 182.35 yuan, maintaining the "buy" rating.
Risk tip: manufacturing investment has fallen sharply; The company's capacity expansion is lower than expected; The competition pattern of the industry has deteriorated.
