\u3000\u30 Shenzhen Fountain Corporation(000005) 19 North Industries Group Red Arrow Co.Ltd(000519) )
The company issued the 2021 annual report
Superhard materials contributed to the increment and special equipment dragged down the performance: in 2021, the company achieved an operating revenue of 7.514 billion yuan, a year-on-year increase of 16.26%; The net profit attributable to the parent company was 485 million yuan, a year-on-year increase of 76.77%. Benefiting from the rapid growth of downstream demand for product cultivation diamonds and industrial diamonds in the field of superhard materials, the profitability of the company has been significantly improved. In 2021, the gross profit margin was 20.74%, with a year-on-year increase of + 3.16pct. North Hongyang, a military subsidiary, lost 243 million yuan, which dragged down the company's performance.
Cultivate diamonds in short supply and enjoy industry dividends through capacity conversion
The market share of diamond products in South Central China, a subsidiary, has ranked first in the world for many consecutive years, contributing an income of 2.407 billion yuan in 2021, a year-on-year increase of + 25.21%; The gross profit margin was 43.45%, a year-on-year increase of + 6.14pct. In 2021, the company's sales of superhard materials exceeded 5 billion carats, a decrease of about 1 billion carats compared with 2018. It is expected that the company will gradually tilt its production capacity to the cultivation of diamonds. The company has obvious advantages in large carat products. It can stably produce cultivated diamond blanks within 30 carats and can supply high-quality cultivated diamond blanks of more than 3 carats in batch. Since 2021, the company has accelerated φ 900 and other large chamber presses are installed, and the performance growth can be expected after the capacity is improved.
The bottom of the special equipment business has stabilized, and the performance is expected to continue to improve
In 2021, the company's special equipment business realized an operating revenue of 4.388 billion yuan, a year-on-year increase of + 15.05%; The gross profit margin was 10.70%, with a year-on-year increase of + 0.82%. The company is the listing platform of intelligent ammunition under China ordnance industry group, and has the R & D and mass production capacity of many national key models of products. At present, the company's military business orders are sufficient, and the recovery of gross profit margin releases the bottom signal. With the improvement and update of military procurement pricing mechanism, the performance is expected to continue to improve.
Investment suggestion: the company's main products are in short supply, and the performance is expected to continue to grow after the capacity is improved. It is expected that the company will realize a net profit attributable to the parent company of RMB 973 / 1261 / 1409 million from 2022 to 2024, corresponding to the current PE valuation of 30x / 23x / 21x respectively, giving a "buy" rating.
Risk tip: the downstream demand of cultivation drilling is less than expected, the industry competition is intensified, and the order of special equipment fluctuates.
