\u3000\u3 Guocheng Mining Co.Ltd(000688) 059 Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) )
Event: the company released the annual report of 2021. In the whole year of 21 years, it achieved an operating revenue of 485 million yuan, yoy + 55.51%; Net profit attributable to parent company: 162 million yuan, yoy + 82.41%; Deducting the net profit not attributable to the parent company of 152 million yuan, yoy + 72.43%, the non recurring is mainly the investment income of government subsidies and trading financial assets. Q4 of the 21st year: the operating income was 126 million yuan, a year-on-year increase of + 38.17%; The net profit attributable to the parent company was 41 million yuan, a year-on-year increase of + 47.01%; Deduct the net profit not attributable to the parent company of 38 million yuan, a year-on-year increase of + 39.61%.
The profitability remains at a high level. The rise in the price of Q4 raw materials slightly affects the gross profit margin, but the overall range is limited: tungsten carbide is the main raw material of the company's products, accounting for about half of the direct raw materials and about 1 / 4 of the total cost. The price of tungsten carbide increased by 25% in 2021, which has a limited impact on the profitability of the company. In 21 years, the gross profit margin of the company was 50.30%, with a year-on-year decrease of 0.6pct and maintained at a high level. The net profit margin was 33.44%, with a year-on-year increase of 4.93pct and further improved. The gross profit margin of Q4 in a single quarter was 47.80% and the net profit margin was 32.16%, with year-on-year changes of -3.78pct and + 1.94pct respectively. We believe that the decrease in gross profit margin is mainly due to the significant increase in the price of Q3 raw materials in 2021 (the price of tungsten carbide increased by 12% in a single quarter). Due to the time lag from goods preparation production to sales, most of the pressure on the cost side is reflected in Q4.
Strict expense control and further decrease of period expenses: in 2021, the expense rate was 13.19%, with a year-on-year decrease of 3.39 PCT, of which the expense rates of sales, management, R & D and finance were 2.71%, 5.41%, 5.13% and - 0.06% (cash abundance after IPO), with a year-on-year change of -0.53pct / -0.09pct / - 1.20pct / - 1.57pct respectively.
In terms of products, the price of products continues to rise: Turning blades are still the main products of the company at present, accounting for 66.94%, which further increases by 5.13pct compared with 20 years, and the unit prices of turning, milling and drilling blades in 21 years are 6.54/4.72/5.91 yuan respectively.
The epidemic is expected to accelerate domestic substitution and increase production capacity in high-end fields: according to the company's data, the market scale of China's cutting tools is about 40 billion (of which about 53% are cemented carbide tools, 21% are high-speed steel tools and 8% are ceramic tools). Under the influence of the epidemic, the import business of some high-end CNC blades in Europe, America, Japan and South Korea has been hindered, providing opportunities for domestic props. Through IPO and issuance of convertible bonds, the company has actively expanded its production and further deployed to the high-end manufacturing field. After the completion of the project, the annual production capacity of cemented carbide NC blades will be increased by 30 million (about 40% on the basis of 21-year production capacity), 5 million cermet blades, 2 million overall cemented carbide tools, 500000 NC tool bodies and 1.4 million efficient drilling tools. After the project is completed, it is estimated that the average sales unit price of cemented carbide NC blade is 9.86 yuan, which is significantly higher than the current price, and the company's profitability is expected to be further strengthened in the future.
Profit forecast: we predict that the net profit attributable to the parent company in 22-24 years will be 2.1/2.8/340 million respectively, and the corresponding PE will be 25X / 19x / 15x respectively, maintaining the buy rating.
Risk warning: the expansion of downstream fields is less than expected; Changes in business developers; Customer concentration risk, etc
