\u3000\u3 Guocheng Mining Co.Ltd(000688) 059 Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) )
Key investment points
Event: the company released the first quarterly report of 2022. In 2022q1, the company achieved a revenue of 130 million yuan, an increase of 22.3% year-on-year and 6.6% month on month; The net profit attributable to the parent company was 40 million yuan, with a year-on-year increase of 15.7% and a month on month decrease of 2.2%. The company’s performance grew steadily, basically in line with our expectations.
The epidemic affected demand and logistics, and the company’s revenue increased steadily; The overall gross profit rate of hard cutting tools is not reduced. Due to the repeated impact of covid-19 epidemic, the operating rate of manufacturing industry has decreased, the demand for industrial cutting tools has weakened, and the logistics is limited, which has affected the sales volume of cutting tools and the steady growth of income. 2022q1 company’s comprehensive gross profit margin was 48.5%, down 3.1 percentage points year-on-year and increased by 0.7 percentage points month on month. The year-on-year decline in comprehensive gross profit margin was mainly due to the fact that the new product hardened cutting tools had not yet realized mass production, and the gross profit margin was low, which lowered the comprehensive gross profit margin; With the price increase of the company’s products, the improvement of the marginal demand and the gradual realization of mass production of hardened cutting tools, it is expected that the company’s gross profit margin will be gradually repaired.
Reduce the cost and increase efficiency, reduce the expense rate during the period, and slightly reduce the company’s net interest rate. During 2022q1, the expense rate of the company was 13.1%, a year-on-year decrease of 1.2 percentage points and a month on month decrease of 0.8 percentage points; Among them, the R & D expense rate was 5.5%, with a year-on-year increase of 1.3 percentage points. The high R & D expense rate supported the company’s medium and high-end development strategy. The net profit margin of 2022q1 was 29.5%, down 1.7 percentage points year-on-year and 2.6 percentage points month on month.
The demand for domestic cutting tools continues to be strong, and the demand for domestic cutting tools continues to be promoted as a leading industrial company. Covid-19 epidemic reduces the supply of foreign brands, improves the quality and production of domestic cutting tools, increases effective supply, industrial chain safety, reduces production costs and increases the demand for domestic cutting tools, which promotes the acceleration of domestic substitution of industrial cutting tools. In 2021, the company sold 82.34 million NC blades, with a year-on-year increase of 52.2%. With the gradual release of the production capacity of integral milling cutter, integral drilling cutter and NC cutter body, the company gradually has the ability to provide overall solutions, improve the direct sales level of key customers, and continue to promote the domestic substitution of industrial cutters.
Profit forecast and investment suggestions. The average annual growth rate of domestic cutting tools is 18.22 billion yuan, which is expected to be 35.2 times that of the parent company in 2024, and the compound growth rate of domestic cutting tools is expected to be 18.23 billion yuan, which is 35.2 times that of the parent company in 2024.
Risk warning: covid-19 epidemic recurrence risk; Manufacturing investment fell sharply; The company’s capacity expansion was lower than expected.
