\u3000\u3 Guocheng Mining Co.Ltd(000688) 122 Western Superconducting Technologies Co.Ltd(688122) )
Performance summary: in 2021, the company achieved an operating revenue of 2.93 billion yuan (+ 38.5%); The net profit attributable to the parent company is 741 million yuan (+ 100%), corresponding to EPS of 168 yuan; The net profit attributable to the parent company after deducting non profits was 654 million yuan (+ 123%). A cash dividend of 1.00 yuan (including tax) is distributed per share, with a dividend rate of 1.32%. In 2022q1, the operating revenue was 887 million yuan (year-on-year + 66.5%), the net profit attributable to the parent company was 215 million yuan (year-on-year + 67.4%, month on month + 5.39%), and the corresponding EPS was 0.46 yuan;
The annual report performance doubled and the industry continued to take the lead: in 2021, the company overcame many adverse factors such as the rise of raw materials and the epidemic, and achieved a good start in the 14th five year plan! Benefiting from the high popularity of the aviation industry, especially in the field of military products, there were abundant product orders throughout the year, the production and sales of high-end titanium alloy, superconducting products and high-performance superalloy products continued to increase, the revenue was in a fast rising channel, and the highlighting of large-scale effect promoted the doubling of net profit. In terms of products, the sales volume of titanium alloy is 6813 tons (+ 41%), and the revenue is 2.46 billion (+ 38%), which is the core contribution point of performance; The revenue of superconducting wire rod and superalloy reached 240 million and 100 million (+ 23% and + 197%) respectively. Although superalloy is still in the early stage of development, the rapid development of “two machines” in the downstream of the product provides strong support for capacity release. After more brands enter the batch production stage, superalloy is expected to become the second growth curve of the company. In terms of product profitability, the company’s annual gross profit margin was 40.8% (+ 2.9pct) and net profit margin was 25.5% (+ 8.0pct). The significant increase in net profit margin was mainly due to the decline of management and financial expenses. In terms of products, the gross profit margin of titanium alloy is 45.3% (+ 2.3pct), and the cost reduction and efficiency increase of unit products offset the impact of the year-on-year increase in the average price of raw material sponge titanium (+ 9.5%); The gross profit margin of superconducting products is 16.3% (+ 11.8pct). The substantial growth of gross profit margin is mainly due to the optimization of product process and the increase of the proportion of high value-added products. NbTi superconducting wire rod for MRI has been supplied to the national project (craft fusion reactor), and MCZ for magnetic control direct drawing monocrystalline silicon and Nb3Sn for nuclear magnetic resonance spectrometer have been produced in batches; The gross profit margin of Superalloy products is 4.0% (+ 15.4pct), which is mainly due to the large-scale effect. The sales volume is 503 tons (+ 104%), which has turned losses into profits within three years, and its profitability will continue to improve with the gradual introduction of production capacity;
Financial data: in 2021, the company’s sales / Finance / R & D expenses changed by + 46.8% / – 59.4% / + 42.3% year-on-year respectively, mainly due to the increase in the purchase of new material application insurance and employee compensation, the increase in exchange earnings caused by exchange rate fluctuations, and the increase in corresponding expenses for the promotion of R & D projects. The company’s accounts receivable were 1.17 billion (+ 77.2%), mainly due to the increase in sales. Contract liabilities amounted to 268 million (+ 54.3%), mainly due to the increase in advance payment for goods after signing the contract. The continuous growth of the above data shows that the company has abundant orders on hand and the company’s future performance can be expected to continue to improve;
2022q1 performance exceeded expectations: although at the beginning of 2022, due to the certain impact on the production activities of Xi’an epidemic company, the price of sponge titanium, the raw material upstream of the product, was high and horizontal, and the price of electrolytic nickel did not change the upward trend, the company still achieved the growth of revenue and profit month on month through the improvement of scale effect and the optimization of product structure, with a gross profit margin of 40.8% (month on month + 6.1pct) in the first quarter. The net cash flow from operating activities decreased by 739% year-on-year in 2022q1, mainly due to the increase in expenditure on purchasing raw materials and receiving labor services. In the long run, we believe that the impact of the price fluctuation of raw materials on the company’s business is expected to be gradually weakened under the process of industrial chain coordination. According to the annual report of 2021, the company subscribed for 2.16 million new shares of Gold Titanium shares in October 2021 and formed a strategic cooperative relationship with upstream raw material suppliers to ensure the stable supply of high-end sponge titanium with quality and quantity. Therefore, we are optimistic about the company’s future control ability on the cost side;
The fund-raising and investment projects continue to advance and open up medium and long-term growth space: according to the announcement of the company in November 2021, the company raised 2.013 billion yuan through private placement, of which 971 million yuan is planned to be invested in the “industrialization project of high-performance metal materials for aerospace”. The project is planned to increase the annual production capacity of 5050 tons of titanium alloy and 1500 tons of superalloy after completion in 2024, At the same time, further improve the stable batch production capacity of high-performance superalloy materials; It is planned to invest 474 million yuan in the “industrialization project of high-performance superconducting wire rod” and the “superconducting industry innovation center”. The former is expected to have an annual production capacity of 2000 tons of superconducting wire rod for MRI after the completion of the project in 2023, and the latter is expected to promote the industrialization process of low-temperature superconducting wire rod. As the expansion plans of the three main products go hand in hand, the company’s core competitiveness can be steadily improved, and the medium and long-term growth space will be gradually opened;
Investment suggestion: with the acceleration of national defense modernization and the domestic substitution trend of key materials, the prosperity of aviation equipment will continue to rise, and China’s high-end titanium alloy and superalloy materials will remain in short supply. Therefore, the company’s new production capacity can be fully digested, and its future performance is expected to maintain high-speed growth by benefiting from the optimization of product structure and the improvement of scale effect. It is estimated that the company’s operating revenue from 2022 to 2024 will be 3.72/49.2/6.07 billion yuan respectively, with a year-on-year increase of 27% / 32% / 23%, and the net profit attributable to the parent company will be 9.55/13.4/1.72 billion yuan respectively, with a year-on-year increase of 29% / 40% / 29%, corresponding to pe37x / 26x / 20x, maintaining the “buy” rating.
Risk tips: raw material price rise risk, raised investment projects are less than expected, downstream demand and domestic substitution process are less than expected, epidemic impact is more than expected, etc.
