\u3000\u3 Bohai Water Industry Co.Ltd(000605) 123 Wuxi Paike New Materials Technology Co.Ltd(605123) )
High quality private forging enterprises, covering aerospace, electric power and petrochemical fields. Founded in June 2006, the company’s products cover all kinds of metal forgings such as rolled ring forgings, free forgings and precision die forgings, which can be used in aviation, aerospace, shipbuilding, electric power, petrochemical and other industries. It entered the wind power industry in 2009, thermal power, marine and other fields in 2012, high-end market fields such as weapons, aerospace, nuclear power and gas turbine in 2013, and opened up the field of civil aviation in 2018. At present, it is one of the few ring forging enterprises that can supply high-end fields such as aviation, aerospace and ships in China. In 2021, the company achieved an operating revenue of 1.733 billion yuan, with a year-on-year increase of 68.65% and a five-year compound growth rate of 38.53%. In 2021, the net profit attributable to the parent company was 304 million yuan, with a year-on-year increase of 82.59% and a five-year compound growth rate of 59.71%; In 2022q1, the net profit attributable to the parent company is expected to increase by 60.77% year-on-year. In 2020, the development of military industry and other downstream industries will accelerate, and the company’s performance will also accelerate significantly. In 2022, the company issued a plan to further improve the production capacity of aerospace high-end forgings, which is expected to further enhance the company’s core competitiveness.
With the acceleration of national defense modernization, there is a broad market space for forgings in the aerospace field. The company actively arranges aerospace and other high-end forging business. The main parts of aeroengine, such as gearbox, disc and ring, need to be forged. Aviation engine forgings are driven by the triple demand of military aircraft, domestic civil aircraft and international subcontracting, with an average annual market space of 22.976 billion yuan. The company’s products have covered many types of aviation engines in service and under research. As the main equipment of information war, missiles have the attribute of consumption. They are in great demand in the environment of military training and war preparation, and the annual procurement cost is 30.314 billion yuan. Since 2018, China’s space launch frequency has accelerated and the space industry has developed rapidly. 55 space launches were carried out in 2021, a record high. It is estimated that China’s annual launch vehicle market reaches 8.375 billion yuan Wuxi Paike New Materials Technology Co.Ltd(605123) participated in the development and matching of long march series and expeditionary upper stage launch vehicles and many types of missiles. With the acceleration of China’s national defense modernization and the accelerated development of aerospace industry, the company’s aerospace forging business is expected to continue to grow at a high speed.
Petrochemicals and energy are the pillars of the national economy, and the demand for forgings is stable for a long time. The company has arranged forging capacity in traditional petrochemical, thermal power and hydropower fields. Petrochemical and energy are the pillars of the national economy, and the forging demand of relevant heavy equipment is stable for a long time. In addition, the company has actively arranged the forging business of green energy equipment such as wind power and nuclear power. Benefiting from the “double carbon” policy, China’s wind power and nuclear power will usher in new development opportunities. The demand for relevant equipment is expected to increase significantly, and the demand for forgings is expected to be released quickly. At present, the company provides nuclear power equipment manufacturers with forgings related to reactor internals, as well as flanges and other forgings in wind turbines. The company’s related businesses are expected to benefit from the process of energy transformation.
Profit forecast and investment suggestion: benefiting from the increased demand for domestic aviation engine forgings brought by the large volume of Chinese military aircraft and the increased demand for new energy wind power and nuclear power forgings, we expect the company’s revenue from 2022 to 2024 to be 2.353 billion yuan, 3.073 billion yuan and 3.814 billion yuan respectively, with gross profit margins of 30.02%, 30.89% and 32.42% respectively, and the net profit attributable to the parent company to be 418 million yuan, 587 million yuan and 793 million yuan respectively, corresponding to EPS of 387 million yuan, 544 million yuan 7.34 yuan. The forging companies Avic Heavy Machinery Co.Ltd(600765) , Guizhou Aviation Technical Development Co.Ltd(688239) in the aeroengine industry chain are selected as comparable companies. The average PE of comparable companies from 2022 to 2023 is 37.76x and 27.48x. The company’s valuation is lower than that of comparable companies. It is covered for the first time and given a “buy” rating.
Risk warning: military orders are less than expected; Risk of product delivery delay; The development of wind power and nuclear power is less than expected; Market space measurement deviation risk; The public materials used in the research report may have the risk of information lag or untimely update.
