\u3000\u3 Guocheng Mining Co.Ltd(000688) 059 Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) )
Event overview
The company released its annual report for 2021, and achieved an operating revenue of 485 million yuan in 2021, with a year-on-year increase of 55.51%; The net profit attributable to the parent company was 162 million yuan, a year-on-year increase of 82.41%; The net profit deducted from non parent company was 152 million yuan, with a year-on-year increase of 72.43%.
Analysis and judgment:
In the past 21 years, the performance has been brilliant and the profitability has been greatly improved. 1) With the increase of the company’s production and sales ratio, the company’s revenue and net profit attributable to the parent company achieved a significant increase of 55.51% and 82.41% respectively in 2021 (among which, the company’s non recurring profit and loss in 21 years was 100345 million yuan, mainly due to the government subsidies received, which further improved the company’s profit). In terms of profitability, the company’s gross profit margin in 2021 was 50.30%, basically unchanged year-on-year. With the gradual emergence of the company’s scale effect, the company’s management / sales / financial expense ratio decreased by 0.09/0.53/1.57pct year-on-year respectively in 2021, resulting in a significant year-on-year increase in the company’s net profit margin by 4.93pct to 33.44%. 2) In a single quarter, the rise in raw material prices dragged down the profitability of 2021q4 in a single quarter. In 2021q4, the company achieved an operating revenue of 126 million yuan, an increase of 38.17% year-on-year and a slight decrease of 2.56% month on month; The net profit attributable to the parent company was 41 million yuan, with a year-on-year increase of 47.01% and a month on month change of – 15.03%, mainly due to the decrease of 4.11pct to 47.80% in 21q4 gross profit margin, which led to the decrease of 4.72pct to 32.16% in net profit margin.
The company accelerates the expansion of production capacity and continues to improve the comprehensive competitiveness of products, which is expected to realize the simultaneous rise of volume and price of product sales. 1) In 2021, the company’s product performance continued to improve and the production capacity was gradually released, and the production and sales volume continued to increase. Among them, the production of turning / milling / drilling blades increased by 56.74% / 13.16% / 23.45% year-on-year to 4967 / 2784 / 208 million pieces respectively, and the sales volume increased by 64.71% / 35.61% / 47.52% year-on-year to 4973 / 3051 / 2.1 million pieces respectively. 2) From the perspective of revenue, the revenue of turning / milling / drilling blades of the company reached 325 / 144 / 12 million yuan respectively in 2021, with a year-on-year increase of 65.41% / 34.01% / 79.31% respectively. Among them, the income of turning blades has increased significantly and gradually reached full production. 3) From the perspective of profitability, the company’s gross profit margin of turning / milling / drilling in 2021 was 47.31% / 55.86% / 79.31% respectively, and the gross profit margin of turning blade was relatively weaker than that of milling / drilling blade. In the future, with the gradual release of the company’s new production capacity, the further enrichment of product lines and the gradual improvement of direct sales channels, the company’s CNC blade product sales are expected to achieve multiple improvements in volume, price and profitability.
Production capacity continues to be released, and the proportion of high value-added products is expected to continue to increase. The company’s IPO project is expected to gradually release production capacity from the second half of 2022 to 2023. At that time, the company will increase the production capacity of 30 million cemented carbide NC blades, 5 million cermet NC blades and 2 million cemented carbide overall tools. At the same time, the company plans to issue convertible bonds to raise funds for the construction project of precision CNC tool body production line (the annual production capacity of 500000 precision CNC tool body products), the construction project of high-efficiency drilling tool production line (the annual production capacity of 1.4 million high-efficiency drilling tools) and supplement working capital. It is expected to achieve an average annual operating income of 408 million yuan and a net profit of 115 million yuan after the completion of production. By actively expanding production capacity + categories, the proportion of high value-added products is expected to further increase.
In 2022, the company will adhere to “independent research and development and continuous innovation” and focus on the R & D, production and sales of cemented carbide NC tools. 1) The company will improve the high-speed cutting performance of NC blade to meet the needs of customers for efficient machining. 2) The company will continue to improve the production process of CNC blades and help customers automate production. 3) Continue to increase research investment in cutting difficult to machine materials in aerospace and other fields, and strive to make a breakthrough in cutting tools for difficult to machine materials. 4) The company will increase the R & D investment of NC tool body, form the collaborative development ability of NC blade and NC tool body, and further enhance the comprehensive competitiveness of the company’s products. 5) Overall cemented carbide cutting tools are widely used in 3C, mold, aerospace, automobile and other fields. The company has actively carried out relevant technical layout and has relatively mature development and manufacturing capacity. In the future, the company will increase investment in this field and actively achieve technological breakthroughs.
Investment advice
We maintain the company’s profit forecast for 20222023 and increase the profit forecast for 2024. It is estimated that the company will achieve revenue of 670 / 882 / 1193 million yuan from 2022 to 2024, with a year-on-year increase of 37.9% / 31.8% / 35.2% respectively; The net profit attributable to the parent company was 224 / 301 / 421 million yuan respectively, with a year-on-year increase of 38.1% / 34.4% / 39.7% respectively; The corresponding EPS from 2022 to 2024 is 5.10/6.85/9.57 yuan respectively, the corresponding closing price of 128.3 yuan / share on March 17, 2022, and the PE from 2022 to 2024 is 25 / 19 / 13 times respectively. We maintain the “overweight” rating.
Risk tips
Capacity expansion is less than expected; The downstream prosperity is lower than expected; Industry competition intensifies.
