\u3000\u3 Guocheng Mining Co.Ltd(000688) 558 Nantong Guosheng Intelligence Technology Group Co.Ltd(688558) )
Key investment points
Event: the company released the annual report of 2021. The annual operating revenue was 1.137 billion yuan, with a year-on-year increase of 54.54%, the net profit attributable to the parent was 200 million yuan, with a year-on-year increase of 66.74%, and the net profit not attributable to the parent was 178 million yuan, with a year-on-year increase of 69.35%. Slightly exceeding market expectations.
Strong market demand + capacity improvement, and high performance growth in 2021.
(1) growth: in 2021, the company’s revenue increased by 54.54% year-on-year, and the net profit attributable to the parent company increased by 66.74% year-on-year. Main reasons: ① industry level: in 2021, China’s machine tool industry continued its restorative growth trend since the second half of 2020, with strong downstream demand, and a significant increase in equipment investment demand in aerospace, new energy vehicles, wind power and other industries; ② Company level: further focus on the strategic direction with CNC machine tools and their automation lines as the core business, strategically reduce the external sales of sheet metal weldments, further improve the internal supporting capacity, shorten the manufacturing cycle and improve the manufacturing efficiency. At the same time, accelerate the construction of raised investment projects, continue to expand the production scale, and then drive the improvement of production capacity. In 2021, the revenue of CNC machine tools, the company’s core business, increased by 74.58% year-on-year, exceeding the growth rate of the overall scale.
(2) profitability: in 2021, the company’s gross profit margin on sales was 25.72%, a year-on-year decrease of 2.45pct. The main reasons are as follows: ① in 2021, the transportation fee and handling fee were changed from sales expense to main business cost (20 years were listed as sales expense), resulting in a decrease in the gross profit margin of CNC machine tools compared with 20 years; ② In 2021, the price of steel raw materials increased, resulting in a decline in the gross profit margin of equipment components. The company’s net profit margin on sales was 17.73%, with a year-on-year increase of 1.16pct. Under the background of the rise in the price of raw materials, the company’s profitability was further improved, indicating that the company’s cost control ability was continuously improved.
(3) cash flow: Historically, the net cash flow generated by the company’s operating activities has been positive, reaching 94 million yuan in 2021. We believe that this is the performance of stable operation. For many years, the company has adhered to the collection mode of payment to delivery, which shows the company’s confidence in the products produced. At the same time, the company’s payment cycle is standardized and normal at the supply chain end. It has never owed money in cooperation with suppliers for many years, and there has never been debt dispute in history. The result is that the company has strong bargaining power at the purchasing end and fast supply cycle, so as to further enhance the company’s competitive strength.
R & D investment continued to increase, and the self-made rate of core functional components further improved. In 2021, the company invested 58 million yuan in R & D, with a year-on-year increase of 60.91%, accounting for 5.09% of operating revenue. Continuous R & D investment has steadily improved the product quality and stability of functional components, and the types of functional components continue to increase. The self-made rate of fully automatic right angle head processed on five sides is further improved, and the self-made ability fully meets the needs of customers; The self-made rate of spindle of NC boring and milling machine is increased to 80%; Gantry and horizontal motorized spindles are under continuous test; The full gear transmission part of gantry spindle includes gearbox and transmission mechanism, and the design and trial production are completed; The design and trial production of main parts of high-power boring and milling spindle and high-precision rotating worktable with large load are completed.
Capacity release further opens up the company’s long-term growth space. At this stage, the main constraint to the continuous growth of the company’s scale comes from the lack of production capacity. After the construction of new production capacity for more than a year, in September 2021, the Longmen products of the company’s fund-raising project have been produced in the new plant area, which has gradually increased in the fourth quarter and gradually increased in volume this year. According to the company’s plan, 50% of the production capacity will be released in 2021 and the production capacity will be fully reached next year. At the same time, the company continues to optimize the production layout of products. Some workshops in the old plant area began to be reconstructed last September (the transformed workshops mainly produce horizontal machining and horizontal boring), and the vertical machining and core functional component workshops will also gradually adjust the planning. We believe that with the gradual release of new production capacity and the transformation and optimization of old production capacity, the company’s product layout is more reasonable and the future growth can be expected.
Maintain the “buy” rating: we expect the net profit attributable to the parent company from 2022 to 2024 to be 279 million yuan, 354 million yuan and 447 million yuan, with corresponding PE of 16, 11 and 10 times respectively.
Risk tip: the risk of weakening the prosperity of the industry and the risk of price fluctuation of main raw materials and purchased parts.
