\u3000\u3 Guocheng Mining Co.Ltd(000688) 028 Beijing Worldia Diamond Tools Co.Ltd(688028) )
Event: the company released the first quarterly report of 2022. In 2022q1, the company achieved a revenue of 69 million yuan, a year-on-year decrease of 1.2% and a month on month decrease of 25.9%; The net profit attributable to the parent company was 7.15 million yuan, a year-on-year decrease of 55.6% and a month on month increase of 47.7%.
Affected by covid-19 epidemic, the downstream demand weakened and the company’s income decreased; The product structure was optimized and the gross profit margin rebounded slightly. In 2022q1, affected by covid-19 epidemic, the demand of downstream customers weakened, and the company’s production and delivery were also restricted, resulting in a significant decline in revenue month on month. The comprehensive gross profit margin of Q1 company was 50.2%, with a year-on-year increase of 0.2 percentage points and a month on month increase of 4.0 percentage points. The month on month increase in gross profit margin was mainly due to the optimization of product structure and the increase in the proportion of superhard cutting tools with high gross profit margin.
During the period of business layout improvement, the expense rate and net interest rate increased month on month. During 2022q1, the expense rate of the company was 36.6%, with a year-on-year increase of 12.4 percentage points and a month on month decrease of 3.7 percentage points; During this period, the expense rate increased significantly year-on-year, mainly because new products such as NC blade and cultivation drill are still in the early stage of market development, with less income but more related expenses. The net profit margin of 2022q1 company was 10.3%, a year-on-year decrease of 12.7 percentage points and a month on month increase of 5.1 percentage points, and the margin of profitability improved.
The cutting tool business continues to be arranged, and diamonds are cultivated to wait for flowering. The company is a leading enterprise of superhard cutting tools in China, with strong product competitiveness. Under the background of increasing demand of superhard cutting tools industry, the development prospect is good; The market scale of cemented carbide NC blades is large, and domestic substitution is in full swing. The company will fully benefit from investing in the production capacity of 28 million pieces of cemented carbide and cermet NC blades; In addition, the company plans to acquire xinjinquan, a precision tool enterprise in 3C industry, to improve the layout of the company’s tool business. At present, there is a strong demand for diamond cultivation, and the products are in short supply. The company uses many years of experience in artificial diamond production to invest in the construction of 200000 carat CVD diamond cultivation capacity. The project is advancing in an orderly manner and is worth looking forward to.
Profit forecast and investment suggestions. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 110 million, RMB 170 million and RMB 220 million respectively, and the compound growth rate of net profit attributable to the parent company in the next three years will be 59.8%. Considering the company’s performance flexibility and strong growth, the company is given 30 times PE in 2022, the target price is 40.20 yuan, and the “buy” rating is maintained.
Risk warning: covid-19 epidemic recurrence risk; Macroeconomic downside risk; The demand for diamond cultivation is lower than the expected risk.
