\u3000\u3 Bohai Water Industry Co.Ltd(000605) 123 Wuxi Paike New Materials Technology Co.Ltd(605123) )
Event: the company released the performance forecast for the first quarter of 2022. It is expected that Q1 company will realize the net profit attributable to the parent company in 2022 (about 105 million yuan, year-on-year + 60.77%, month on month + 15.7%), deducting the net profit not attributable to the parent company (about 102 million yuan, year-on-year + 70.22%, month on month + 17.38%).
As the core supplier of ring forgings in China’s aviation, missile and other fields, the company’s 2022q1 performance has increased significantly year-on-year and maintained growth month on month, or indicates the high-profile bearing of downstream aviation and missile tracks. We expect that the company’s aviation and missile forgings will maintain high growth in the future, and forgings in petrochemical, electric power and other fields are expected to maintain stable growth. In addition, as a typical civilian military enterprise, the company has flexible mechanism and is actively distributing new energy and other fields, which is expected to open more growth poles.
1) Aerospace: military products benefit from large-scale loading of weapons and equipment, and civil products enter the industrial chain of international aviation giant. 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 Luoluo and Ge respectively in 2020, covering a variety of models. The orders of Luoluo and Ge continued to advance in 2021. At present, the first article development of several part numbers has been started and some batch production orders have been received.
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 participates in the supporting of long march series rockets and multi-type missiles. The “14th five year plan” missiles, as consumable equipment, will be equipped more and more. In addition, China’s aerospace rockets are launched more and more frequently, which is expected to drive the rapid growth of forgings in the company’s aerospace field. 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) Petrochemical Forgings: Petrochemical forgings are flanges and tubesheets for various equipment, and the demand is generally stable. The company added forging products for photovoltaic crystal smelting furnace. We expect that in the next two years, due to the supply bottleneck of silicon material, the photovoltaic industry will continue to increase silicon material production capacity and the demand for crystal smelting furnace will increase significantly. Therefore, the company’s forging orders for crystal smelting furnace will increase rapidly.
3) electric Forgings: 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 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.
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 29.7x, 21.5x and 16.3x, 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.
