Investment summary:
As the second of our series of reports on machine tool and cutting tool industry, this report mainly considers how Chinese enterprises can promote the high-end cutting tool market from the perspective of benchmarking the global cutting tool champion Sandvik.
The rise of the global tool champion. After more than 160 years of operation, Sandvik has developed into a global leading company of cutting tools and construction machinery with a revenue of nearly 100 billion and a market value of nearly 300 billion. In the 1860s, Sandvik was founded and started from steel smelting to actively explore sales channels; In the 1940s, the company transformed its cemented carbide cutting tool business to create high value-added products, expand production capacity and promote brand awareness; In the 1980s, with the rapid development of the global economy, the company’s business entered a period of rapid rise, and gradually determined the leading position of the cutting tool industry with years of accumulation; After the financial crisis, the company focused more on its main business and planned digital transformation. While stripping off its non main business, the company actively expanded its cutting tool territory through horizontal mergers and acquisitions to create diversified and all-round manufacturing and processing solutions.
Benchmarking Sandvik to find the way for Chinese enterprises to upgrade to high-end. High R & D investment and building high-tech barriers for enterprises: by reviewing Sandvik’s growth track, we found that Sandvik maintained its R & D investment at around 4% and its annual patent authorization at around 1000, building a strong technical barrier; Deepen the understanding of processing technology and meet the high-end customized needs of customers: mechanical part designers often focus on performance design and function realization when carrying out structural design, and lack understanding of processing and manufacturing links, which puts forward higher requirements for the skill level of process personnel. As a tool manufacturer and construction machinery manufacturer, Sandvik has deep foundation and unique opinions on machining technology, It can provide diversified and all-round manufacturing and processing solutions according to different needs of customers, and truly realize one-stop turnkey service with high added value; Famous brands + direct sales channels to build a b-end moat: when targeting b-end customers, Sandvik built a b-end moat by implementing the strategy of simultaneous construction of multiple brands and direct sales, and deeply bound high-end customers; The era of industrial Internet has come, and the layout of digital transformation is looking for opportunities: at a time when the digital economy is developing rapidly, the manufacturing industry will also be transformed and upgraded towards digitization and intelligence. In order to take the lead in the digital transformation, Sandvik has “generously” in computer-aided manufacturing in recent years and has successively acquired a number of cam service providers to improve tool digital services.
Investment strategy: by benchmarking the rise of overseas giant Sandvik, we believe that at the time of accelerating domestic substitution, Chinese tool enterprises need to pay more attention to R & D investment and intellectual property protection in breaking the high-end situation, deepen their understanding of machining technology, improve product power, build brand awareness and deeply bind customers by using direct sales channels. In the process of digital transformation, We should actively integrate and cooperate with cam service providers to improve the digital, information and intelligent service ability of manufacturing and processing. As the teeth of industrial machine tools, cutting tools will make great progress as China’s machine tool industry moves towards high-end, and there is a broad space in the future. After conquering the technology related to cutting tools, Chinese enterprises have closely followed Europe, America, Japan and South Korea in product performance and entered the medium and high-end market. We continue to be optimistic about the logic of domestic substitution and numerical control rate improvement in the tool industry. Companies such as China Tungsten And Hightech Materials Co.Ltd(000657) , Oke Precision Cutting Tools Co.Ltd(688308) driven by cemented carbide serrated blade and numerical control tool and Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) focusing on cemented carbide numerical control tool are expected to benefit directly.
Risk tip: the manufacturing industry is not as promising as expected, the development of CNC machine tools is not as expected, the capacity expansion is not as expected, the market competition is intensified, and the manufacturing with added materials replaces the manufacturing with reduced materials.
