\u3000\u3 Guocheng Mining Co.Ltd(000688) 122 Western Superconducting Technologies Co.Ltd(688122) )
Event overview
The company released the annual report of 2021 and the first quarterly report of 2022: in 2021, the revenue was 2.927 billion yuan (+ 38.54%), the net profit attributable to the parent was 741 million yuan (+ 99.98%), and the net profit not attributable to the parent was 654 million yuan (+ 122.79%); In 2022q1, the revenue was 887 million yuan (+ 66.51%), the net profit attributable to the parent company was 215 million yuan (+ 67.40%), and the net profit not attributable to the parent company was 202 million yuan (+ 77.57%).
Analysis and judgment:
Once again, the performance exceeded the expected profit.
In 2021, the company realized a revenue of 2.927 billion yuan (+ 38.54%), and a net profit attributable to the parent company of 741 million yuan (+ 99.98%); In 2022q1, the company achieved a revenue of 887 million yuan (+ 66.51%) and a net profit attributable to the parent company of 215 million yuan (+ 67.40%). The company’s performance exceeded expectations again, mainly due to full orders, high capacity utilization, rapid growth in production and sales revenue of high-end titanium alloy materials, superconducting products and high-temperature alloy materials, optimization of sales structure and economies of scale. In terms of business, high-end titanium alloy materials are 2.458 billion yuan (+ 37.90%), superconducting products are 239 million yuan (+ 22.86%), and high-performance superalloy materials are 102 million yuan (+ 196.67%).
The scale effect is obvious, and the gross profit margin of various businesses has improved.
In 2021, the company’s comprehensive gross profit margin was 40.83% (+ 2.91pct), including 45.31% (+ 2.28pct) for high-end titanium alloy materials, 16.33% (+ 11.82pct) for superconducting products and 4.01% (+ 15.43pct) for high-performance superalloy materials. The main reasons are the scale effect caused by the rapid growth of high-end titanium alloy sales, the improvement of gross profit margin caused by the transformation of superconducting magnet from project system to product system, and the turnaround from loss to profit realized by batch supply of superalloys. The comprehensive gross profit margin of 2022q1 company is 40.76% (-0.50pct), or related to the price rise of raw material sponge titanium. With the implementation of capacity expansion and construction of many sponge titanium manufacturers, the tight supply of military high-quality sponge titanium is expected to be alleviated.
During the period, the cost control was in place and the net interest rate was significantly improved.
In 2021, the company’s expense rate during the period was 13.21% (- 4.32pct), of which the sales expense rate, management expense rate, R & D expense rate and financial expense rate were 1.73%, 4.30%, 6.35% and 0.83% respectively, with a year-on-year increase of + 0.10pct, – 2.59pct, + 0.17pct and – 1.99pct. During 2022q1, the company’s expense rate was 10.64% (- 2.79pct), of which the sales expense rate, management expense rate, R & D expense rate and financial expense rate were 0.40%, 5.35%, 4.25% and 0.65% respectively, with a year-on-year increase of -0.29pct, -2.33pct, -0.64pct and + 0.47pct. In particular, the decline in the rate of administrative expenses is the most obvious, and the level of expense control has been effectively improved. Under the combined effect of comprehensive gross profit margin, period expense rate and other factors, the net profit margin of the company in 2021 and 2022q1 were 25.46% (+ 7.96pct) and 23.96% (+ 0.22pct) respectively, and the profitability was significantly improved.
In terms of titanium alloy, high-end titanium alloy materials are the basic sector of the company, and new production capacity and new market have a solid support for the company’s performance.
The company’s high-end titanium alloy materials include bars, wires, forgings, etc. related products have passed the certification of customers such as aviation industry group and China Aviation Development Group, and have been applied to multiple types of equipment in batches. Driven by factors such as the large volume of military aviation equipment and the increase of the proportion of titanium alloy in new types of equipment, the company has a strong demand for titanium alloy. In addition, the company has also passed the qualification certification of COMAC Ti6Al4V titanium alloy materials. With the domestic commercial aircraft entering the batch production stage, the company will gradually realize the batch delivery of relevant products. In 2021, the company focused on developing the market of high-end titanium materials for Aeroengines. The cold end parts of aeroengines are an important application field of high-end titanium materials. The development of new markets has brought strong impetus to the growth of titanium alloy business.
In terms of superconducting business, the large volume of superconducting materials has brought scale effects, superconducting magnets have been changed from project system to product system, and the gross profit margin has been improved.
At present, the company is the only commercial production enterprise of low-temperature superconducting wire rod in China and the only whole process production enterprise of niobium titanium ingot rod, superconducting wire rod and superconducting magnet in the world. The company has core advantages in low-temperature superconducting materials such as NbTi and Nb3Sn and high-temperature superconducting materials such as Bi-2223, Bi-2212 and MgB2. Superconducting wires for MRI have been applied in batches in the products of major MRI equipment manufacturers such as GE, Siemens, Shanghai Lianying, Ningbo Jianxin and Shanghai Chenguang, and the self-developed superconducting magnets for MCZ have been manufactured in batches. In the future, with the continuous expansion of superconducting technology in the fields of medical treatment, energy, transportation, national defense and so on, the market prospect of superconducting products of the company is broad.
\u3000\u3000? In terms of superalloys, there is an urgent need for domestic substitutes. The company has mastered the core preparation technology and is expected to become a new performance growth point.
The company is one of the emerging suppliers of high-performance superalloy materials in China. It has successively undertaken the research and development of a variety of superalloy materials on China’s key national defense equipment, and continued to break through the engineering preparation technology of superalloy materials for aeroengines and gas turbines. Typical products have been delivered in small quantities to many models. The company broke through the key engineering technology of gh4169g large bar for integral blade disc of domestic main engine, and realized the installation application in engine rotating parts. The company continues to promote the development and Application Research of high-performance superalloy materials for “two engines”. Typical superalloys such as GH4169 and GH738 have entered the stage of batch supply in 10 and other models of engines and Shangfa Changjiang series engines. At the same time, the company has opened up a new market for domestic Superalloys for gas turbines and realized the batch supply of GH4169 and other alloy products. In the future, the company will accelerate the promotion and application of high-end superalloy products in engine, gas turbine and other fields.
Investment advice
Considering the strong demand of downstream aviation equipment for titanium alloy and superalloy and the continuous release of the company’s new production capacity, we adjusted the company’s revenue forecast for 20222023 from 4.096/5.673 billion yuan to 4.249/5.791 billion yuan and EPS from 2.20/3.25 yuan to 2.25/3.28 yuan. It is estimated that the company will achieve revenue of 4.249/57.91/7.319 billion yuan, net profit attributable to the parent company of 1.045/15.22/2.007 billion yuan and EPS of 2.25/3.28/4.33 yuan from 20222024 respectively, Corresponding to the closing price of 75.97 yuan / share on April 28, 2022, PE is 34 / 23 / 18 times respectively, maintaining the “buy” rating.
Risk tips
The risk that the completion and release progress of new production capacity is less than expected, the risk that the development of titanium alloy in the field of aeroengine is less than expected, the risk that the certification progress of Superalloy products is less than expected, and the business risk caused by the price fluctuation of upstream raw materials.
