\u3000\u3 Guocheng Mining Co.Ltd(000688) 059 Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) )
Investment logic
Focus on NC blade manufacturing, with high performance and excellent profitability: since its establishment, the company has focused on NC blade manufacturing. In 2020 and 2021, the company's NC blade output was 57.97 million and 79.59 million respectively, ranking in the first echelon in China. From 2017 to 2021, the compound growth rate of the company's revenue and net profit attributable to the parent was 38% and 51% respectively. In 2021, the revenue and net profit attributable to the parent increased by 56% and 82% respectively year-on-year. At present, it is in a period of rapid growth. At the same time, the company's profitability is excellent. Under the background of the continuous rise in the price of the company's raw material tungsten carbide, the gross profit margin and net profit margin in 2021 are 50.3% and 33.44% respectively. The gross profit margin decreased by 0.6pcts year-on-year and the net profit margin increased by 4.93pcts year-on-year.
The domestic substitution space for cemented carbide cutting tools is nearly 10 billion yuan, and the domestic substitution will be accelerated in 2021: according to our calculation, the market scale of China's cemented carbide cutting tools will be 22.3 billion yuan in 2020. The output of China's CNC metal cutting machine tools will increase by 40% year-on-year in 2021, and the demand for cutting tools is expected to continue to grow. In 2021, China's imports of cemented carbide blades amounted to 4.011 billion yuan, a year-on-year decrease of 8.21%; The export volume was 1.655 billion yuan, a year-on-year increase of 39.31%, making significant progress in replacing imports and increasing exports. In 2021, the total import volume of China's blades / milling cutters / drill bits / tapping tools was 8.1 billion yuan. Considering that some overseas enterprises set up factories in China and did not include the import data, we judge that the domestic substitution space of cemented carbide tools is nearly 10 billion yuan. In 2021, the import unit price of cemented carbide coated blades was nearly four times the export unit price, and there was still a large gap between the price of Chinese cutting tools and overseas ones. According to our calculation, the market share of Zhuzhou Diamond, Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) , Oke Precision Cutting Tools Co.Ltd(688308) and Oke Precision Cutting Tools Co.Ltd(688308) in the field of cemented carbide cutting tools in 2020 was 7.5%, 1.4% and 1.4% respectively. It is expected to continue to increase the market share through the two dimensions of "volume" and "price".
The new production capacity is oriented to high-end fields, the supporting capacity of complete solutions is enhanced, and the added value of products is improved: the output of CNC blades of the company increased by 37% year-on-year in 2021, and the production capacity of 30 million pieces raised and invested by the company's IPO is expected to be released this year. We expect that the output of subsequent companies will continue to grow and reach 130 million pieces in 2024. The company expects that in the first year after the new production capacity is put into operation, the average price of cemented carbide and cermet CNC blades will be 9.86 yuan / piece and 9.2 yuan / piece respectively, which is significantly higher than the average price of 5.8 yuan / piece in 2021. It is expected to create CNC blades with "both volume and price". At the same time, the company plans to raise no more than 400 million yuan through the issuance of convertible bonds and build the production capacity of NC cutter body and drilling cutter, which is expected to improve the company's ability to provide complete solutions and enhance the added value of the overall products.
Profit forecast and investment suggestions
It is estimated that the net profit attributable to the parent company from 2022 to 2024 is expected to be 218 million yuan, 291 million yuan and 370 million yuan respectively, corresponding to the current pe23x, 17x and 13X. Considering the growth space of the cutting tool industry, the company's production capacity continues to expand and the product line continues to enrich. In the future, it is expected to provide solutions for high-end market customers and maintain high profitability. The company will be given a target price of 148.76 yuan for 6 to 12 months, corresponding to pe30x in 2022, "Buy" rating is given for the first time.
Risk
The progress of domestic substitution is less than expected, the average price of CNC blades is less than expected, the capacity expansion is less than expected, the risk of lifting the ban on restricted shares and the risk of reducing shareholders' holdings.
