\u3000\u30 Xuchang Ketop Testing Research Institute Co.Ltd(003008) 55 Jiangsu Toland Alloy Co.Ltd(300855) )
Event: the company released the annual report of 2021 and the performance of 2022q1. In 2021, the company achieved revenue (698 million yuan, year-on-year + 27.73%), net profit attributable to parent company (181 million yuan, year-on-year + 66.24%), net profit not attributable to parent company deducted (164 million yuan, year-on-year + 73.51%). In a single quarter, the revenue of 2021q4 (177 million yuan, year-on-year + 29.23%, month on month + 2.16%), the net profit attributable to the parent (50 million yuan, year-on-year + 58.64%, month on month + 18.21%), and the net profit not attributable to the parent (49 million yuan, year-on-year + 125.17%, month on month + 16.49%); 2022q1 company achieved revenue (212 million yuan, yoy + 42.15%, mom + 19.75%), net profit attributable to parent company (40 million yuan, yoy + 11.86%, Mom – 18.97%), net profit not attributable to parent company deducted (40 million yuan, yoy + 22.08%, Mom – 18.31%).
Income statement: in 2021, the revenue and profitability increased simultaneously, and the revenue maintained rapid growth in 2022q1.
1) 2021: the company’s revenue increased by 27.73% year-on-year, of which almost all cast superalloys and special stainless steel are military products, and the revenue growth rate is as high as 45.41% and 60.42% respectively, which is the main source of the company’s revenue growth. In terms of profitability, in 2021, the company achieved gross profit margin (37.31%, year-on-year + 4.75pct) and net profit margin (25.98%, year-on-year + 6.01pct). The increase in gross profit margin was mainly due to the year-on-year decrease of 3.37pct in the proportion of direct material cost to revenue and 1.52pct in the proportion of manufacturing cost to revenue under scale effect; In terms of net profit margin, in addition to the significant increase in gross profit margin, the significant increase in government subsidies (41 million yuan, year-on-year + 112.53%) led to the year-on-year increase of other income in the proportion of revenue by 2.33 PCT; In terms of period expense rate, it increased from 12.58% in 2020 to 13.80% in 2021, mainly due to the confirmation of share based payment expenses by equity incentive, resulting in a year-on-year increase of 2.02pct in management expense rate.
2) 2022q1: the company’s revenue increased significantly by 42.15% year-on-year and 19.75% month on month, indicating that the high view of downstream aviation is still sustained. However, there was a significant decline in profitability. In 2022q1, gross profit margin (34.02%, yoy -3.11pct, mom -1.49pct), net profit margin (19.05%, yoy -5.16pct, mom -9.11%), we believe that the decline in gross profit margin is mainly due to the rise in raw material costs, while the decline in net profit margin is mainly due to other income accounting for revenue (YoY -1.64pct, mom -4.58pct, mainly due to the sharp decline in government subsidies), Credit impairment loss accounted for revenue (YoY + 1.55pct, mom + 3.04pct, mainly due to the increase of credit impairment loss caused by the increase of accounts receivable).
Balance sheet and cash flow statement: multiple subjects indicate that the company will usher in rapid growth. 1) Inventory: at the end of 2021, it increased by 65.74% compared with the beginning of the year, mainly due to the growth of raw materials and products in process by 112.30% and 109.62% respectively, indicating that the downstream demand increased significantly, and the company increased its stock; 2) Prepayment: the end of 2021 increased by 753.81% compared with the beginning of the year, and 2022q1 increased by 408.31% compared with the end of 2021, indicating that the company has increased procurement to cope with the significant growth of downstream demand; 3) The demand for prepayment from downstream customers increased by 123.46% at the end of 2022q1, which led to a significant increase in the demand for prepayment from downstream customers. 4) Cash paid for purchasing goods and receiving labor services: the year-on-year increase of 59.56% in 2021 compared with 2020 shows that the company’s downstream procurement has increased significantly.
Jiangsu Toland Alloy Co.Ltd(300855) as the core supplier of high-temperature parent alloy and precision casting gearbox for China’s military aero-engine, its revenue in 2022q1 has increased significantly year-on-year and maintained growth month on month, which may indicate the high scenery of China’s military aero-engine track. We believe that Jiangsu Toland Alloy Co.Ltd(300855) as a civilian military enterprise with explosive products in China’s aero-engine industry chain, it will significantly benefit from the high scenery of the aero-engine track.
1. At the industry level: the aeroengine track has four growth logics and spawns a trillion market. 1) Batch production and speed-up of the main models of the third generation aircraft; 2) A large number of new aircraft launch vehicles have intensively entered the stage of finalization and batch production; 3) With the increasing intensity of practical training, the market after aircraft maintenance is opening up rapidly; 4) Domestic commercial aviation launch batch production will bring greater growth space.
2. At the company level: Jiangsu Toland Alloy Co.Ltd(300855) is located in “high-temperature alloy materials, precision casting” and other links with extremely high barriers. The company has become a rare civilian military enterprise with popular products in China’s aviation development industry chain with precision casting GearBox products, which will significantly benefit from the high prosperity of the aviation development track. Superalloy materials + products need to face the extremely harsh working environment such as high temperature, high pressure and high speed of aeroengine, and superimpose the harsh requirements such as quality, reliability and performance stability, which creates a very high barrier in this link Jiangsu Toland Alloy Co.Ltd(300855) is one of the rare casting master alloy enterprises in China (others such as Gaona Aero Material Co.Ltd(300034) , 621, Shenyang Metal Institute, etc.), and it has the technology of “casting master alloy smelting + precision casting process”, which makes it obtain the popular single product precision casting gearbox. As the main bearing component of aeroengine, precision casting gearbox needs to meet the requirements of high strength and thin wall, and has very high requirements for materials and processing technology Jiangsu Toland Alloy Co.Ltd(300855) is the first to realize the mass production of large-scale superalloy precision castings with diameter greater than 1000mm and wall thickness less than 2mm in China. The leading technology enables it to supply in batches on multiple aircraft launch models, and the value of single machine will increase when the third generation machine is upgraded to the fourth generation machine. It will grow rapidly in the future with high certainty.
Growth path of the company in the future: military products will continue to cultivate the industrial chain of two machines; Set up Shenyang Tunan to expand its product line; Continue to expand in gas turbines, nuclear power and other civilian products.
1. New model penetration + capacity expansion, “casting master alloy + precision casting” has developed rapidly in the field of two machines. The casting master alloy brand is continuously developed and applied to various models, and the excellent single product of precision casting gearbox will improve the permeability on the new brand. In addition, the company actively expanded its production to cope with the rapid growth of the aviation industry. For example, in 2020, the company will add 2.5 tons of vacuum induction furnace into operation and increase the smelting capacity of 8001000 tons / year; The IPO raised investment projects “construction project of super pure high-performance superalloy materials with an annual output of 1000 tons” and “construction project of complex thin-walled superalloy structural parts with an annual output of 3300 pieces” were put into operation in July 2022 and the end of 2022 respectively. The production capacity of casting master alloy, deformed Superalloy and precision casting gearbox will be added. The production capacity is not the core contradiction of the company in the short term.
2. Set up Shenyang Tunan and expand the product line in the field of aviation development. In July 2021, the company set up a subsidiary, Shenyang Tunan, which will form a complete research and development capacity of aviation parts in the future, which is in line with the industrial development idea of “small core and large cooperation” of the aviation development group. At the same time, it will help the company further cultivate the aviation development track and expand the product line.
3. Civil fields such as gas turbine and nuclear power continue to expand. The company’s deformed superalloys are mainly in civil fields such as nuclear power, gas turbine and petrochemical industry. The compound growth rate of revenue from 2016 to 2020 was 10.01%, and the revenue in 2021 increased by 4.90% year-on-year. The main reason is that the smelting capacity is squeezed by military products. With the release of capacity and the strong demand for gas turbine and nuclear power, we believe that the deformed superalloy products will develop rapidly; Special stainless steel is mainly seamless pipe, which is used for various kinds of pipes, oil pipelines, hydraulic pipelines and other components of aircraft fuselage. The company’s special stainless steel seamless pipe occupies a prominent market position in China’s aviation field, with revenue growth of 23.19% and 60.42% in 2020 and 2021. In the future, the company will continue to cultivate in the field of civil products, and the military civilian integration development strategy will open up growth space.
Investment suggestion: Jiangsu Toland Alloy Co.Ltd(300855) is an excellent supporting supplier of Superalloy in the aviation development industry chain, which will significantly benefit from the large-scale growth of aeroengines. We estimate that the net profit attributable to the parent company from 2022 to 2024 will be 254 million yuan, 345 million yuan and 462 million yuan respectively, and the corresponding PE will be 34x, 25X and 19x respectively, maintaining the “buy” rating.
Risk warning: downstream demand is less than expected; Capacity release was less than expected.
