\u3000\u3 Guocheng Mining Co.Ltd(000688) 059 Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) )
Performance review
The company realized an operating revenue of 134 million yuan in 2022q1, with a year-on-year increase of 22.32%; The net profit attributable to the parent company was 40 million yuan, a year-on-year increase of 15.68%.
Business analysis
In the first quarter, the performance maintained growth, maintained high profitability and further decreased the expense rate: in 2022q1, the performance of the company maintained growth and achieved a gross profit margin of 48.53%, a year-on-year decrease of 3.07pcts and a month on month increase of 0.73pcts; The net interest rate was 29.52%, with a year-on-year decrease of 1.69pcts and a month on month decrease of 2.64pcts. We believe that the slight fluctuation of the company’s Q1 profitability is affected by the change of product sales structure in the current period and the recognition of some credit impairment losses. It is a normal fluctuation, and the company still maintains a high profitability. In 2022q1, the company’s management + sales expense ratio was 7.66%, with a year-on-year decrease of 1.92 PCTs and a month on month decrease of 0.25 PCTs, and the economies of scale continued to show.
In 2022, the company’s IPO raised and put into operation can be gradually implemented, and the output of NC blades is expected to continue to grow: in 2021, the company’s NC blade production capacity will be 61 million pieces / year, with an output of 79.59 million pieces, a year-on-year increase of 37%. In 2022, the company’s IPO raised and invested 30 million pieces, and the production capacity will begin to be gradually released. We expect the company’s output to continue to grow and reach 130 million pieces in 2024.
The new production capacity is oriented to the high-end field. The convertible bond project expands the product category, and the average price of the company’s products is also expected to continue to increase: the company expects that the average price of cemented carbide and cermet CNC blades will be 9.86 yuan / piece and 9.2 yuan / piece respectively in the first year after the new production capacity is put into operation, which is significantly higher than the average price of 5.8 yuan / piece of the company’s overall CNC blades in 2021, which is expected to create a “simultaneous increase in volume and price” of CNC blades. 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 pe19x, 14x and 11x. Considering the growth space of the tool industry, at the same time, the company’s production capacity continues to expand and its product line continues to enrich. In the future, it is expected to provide solutions for high-end market customers, maintain high profitability and maintain the “buy” rating.
Risk tips
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.
