\u3000\u3 Guocheng Mining Co.Ltd(000688) 059 Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) )
The performance was in line with expectations, and the blade capacity increased rapidly
In 2021, the company achieved a revenue of 485 million yuan (year-on-year + 55.5%), a net profit attributable to the parent company of 162 million yuan (year-on-year + 82.4%), and a net profit not attributable to the parent company of 152 million yuan (year-on-year + 72.4%), which was in line with expectations. The annual blade shipment was 82.34 million pieces (year-on-year + 52%), and the average unit price was 5.9 yuan / piece (year-on-year + 2%). By business: in 2021, the growth of turning blades was the fastest, with revenue of 325 million yuan (year-on-year + 68.4%) and gross profit margin of 47.3% (year-on-year + 1.9pct), which was mainly due to the obvious volume caused by the improvement of the performance of the company's products and the booming downstream prosperity, and the gross profit margin increased significantly under the effect of scale. The income of milling blade was 144 million yuan (year-on-year + 34%), and the gross profit margin was 55.9% (year-on-year -2.8pct), which was mainly due to the company's active price strategy and appropriately reducing the prices of some products.
Under the scale effect, the profitability is better and the operating cash flow is abundant
In 2021, the gross profit margin was 50.3% (year-on-year - 0.6pct) and the net sales profit margin reached 33.4% (year-on-year + 4.9pct), which still increased significantly against the background of rising raw material costs, mainly due to 1) the strong bargaining power of the company's products, which can transfer the pressure of rising costs to the downstream; 2) Under the scale effect, all expense rates decreased, among which the sales, management (including R & D) and financial expense rates decreased by 0.5/1.3/1.6pct respectively; 3) IPO listing reduces the financial expense rate, and government subsidies bring non recurring profits and losses of 10.03 million yuan.
The company's cash flow is in good condition. In 2021, the operating cash flow reached 206 million yuan, with a year-on-year increase of + 104%. The company's cash flow is in good condition, mainly due to the improvement of operating capacity. In 2021, the number of days of accounts receivable turnover was 161 days (year-on-year-33 days) and the number of days of inventory turnover was 108 days (year-on-year-22 days). In addition, the inventory balance at the end of 2021 was 88 million yuan (year-on-year + 55.8%), mainly due to the rise in the price of raw materials and the gradual expansion of the company's sales scale, which increased the stock of raw materials accordingly.
Under the continuous overweight R & D, the R & D achievements are outstanding
In 2021, the company's R & D expenditure was 24.91 million yuan (year-on-year + 26%), accounting for 5.1% of revenue; Benefiting from continuous overweight research and development, the company added 13 patents throughout the year, and made good progress in ultra-fine nano cemented carbide, matrix brand of aviation difficult machining materials, high-performance cermet materials, PVD coating material process, complex mold design and new product development of various tool bodies. In addition, the company has established a cutting laboratory simulating real application scenarios, equipped with advanced testing equipment such as tool runout detection and wear measurement, which can accurately evaluate the cutting performance of products in the process of new product development and improve the efficiency of R & D.
With full orders and the release of high-end production capacity, the performance will be accelerated
Since the beginning of 2022, the demand of the cutting tool industry has been strong. At present, the production schedule of the company is from January to February (2021q4 is 1 month +), the orders are full, and the monthly output climbs to 8 million pieces / month. At the same time, with the completion of the plant and the landing of the equipment, the company's IPO raised investment project will start mass production from August to September, which is expected to contribute 7-8 million pieces of new high-end production capacity in 2022, and 30 million pieces of new high-end production capacity will be achieved in 2023. The unit price of this part of high-end blades is expected to increase by more than + 50% compared with the original production capacity. The company's convertible bond project plans to raise no more than 400 million yuan for the construction of precision CNC tool body production line, efficient drilling tool production line and supplementary working capital. The two projects are expected to release capacity in 2023. It is expected to realize the production of 500000 precision CNC cutter bodies and 1.4 million high-efficiency drilling tools every year after reaching the production capacity, with a total annual income of 408 million yuan and a net profit of 115 million yuan.
With the deepening of import substitution, the recognition of domestic large terminal enterprises for domestic tools has gradually increased. We believe that the demand for domestic tools will continue to be optimistic. In the long run, with the continuous improvement of CNC rate of machine tools and the upgrading of consumption in the cutting tool market in China, the prosperity of the industry has a strong continuity. As the leader of domestic private cutting tools, the company is expected to benefit from the general trend of domestic substitution.
Profit forecast and investment rating: the company is in a period of rapid development. We expect the net profit attributable to the parent company from 2022 to 2024 to be 2.26 (up 5.1%) / 3.15 (up 12.5%) / 432 million yuan, corresponding to 25 / 18 / 13 times of the current share price PE respectively, maintaining the "overweight" rating.
Risk warning: the downstream demand is less than the expected risk; Raw material price fluctuation risk.
