\u3000\u3000 Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) (688059)
Event overview
The company released the performance forecast for 2021. It is estimated that the net profit attributable to the parent company will be 157 million yuan to 167 million yuan in 2021, with a year-on-year increase of 67.9951 million yuan to 77.9951 million yuan. The net profit of non parent company deduction was 147 million yuan to 157 million yuan, with a year-on-year increase of 58.6651 million yuan to 68.6651 million yuan.
Analysis and judgment:
Many factors help the company’s performance growth. 1) With the continuous improvement of the company’s product performance, the gradual release of production capacity and the continuous improvement of sales channels, the product sales volume increased, which effectively promoted the growth of revenue. 2) The import business of some high-end CNC blades in Europe, America, Japan and South Korea has been hindered due to the covid-19 epidemic. The willingness of end users to choose domestic blades has been increasing, which has promoted the growth of the company’s revenue. 3) In 2021, the impact of non recurring profit and loss on net profit is expected to be between 9 million yuan and 11 million yuan, mainly due to the government subsidies received by the company.
The new capacity is expected to be gradually released in 22 years, and the proportion of high value-added products is expected to continue to increase. The company’s IPO project is expected to gradually release production capacity from the second half of 2022 to 2023. At that time, the company will increase the production capacity of 30 million cemented carbide NC blades, 5 million cermet NC blades and 2 million cemented carbide overall tools. At the same time, the company plans to issue convertible bonds to raise funds for the construction project of precision CNC tool body production line, high-efficiency drilling tool production line and supplement working capital. After reaching production (expected to be 2023-2024), it is expected to achieve an average annual operating revenue of 408 million yuan and a net profit of 115 million yuan. By actively expanding production capacity + categories, the proportion of high value-added products is expected to further increase.
Benefiting from the accelerated superposition and concentration of import substitution, the company’s performance continued to benefit. The market scale of the global cutting tool industry has reached tens of billions of dollars, and the consumption scale of cutting tools in China is about 40 billion yuan, so the market space is huge. With the progress of China’s technology and the impact of covid-19 epidemic on overseas tool manufacturers, import substitution is expected to accelerate. On the other hand, as the market demands more and more cutting tool products, some technologically backward manufacturers will be gradually eliminated, and the market concentration is expected to be further improved. The company is expected to continue to benefit under the background of import substitution and increased concentration.
Investment advice
Maintaining the previous performance forecast unchanged, it is estimated that the revenue from 2021 to 2023 will be RMB 478 / 670 / 882 million respectively, with a year-on-year growth rate of 53.2% / 40.0% / 31.8%; The net profit attributable to the parent company is RMB 161 / 224 / 301 million respectively, corresponding to EPS of RMB 3.67/5.09/6.84 respectively, corresponding to the closing price of RMB 150.38/share on January 14, 2022, and PE of 41 / 30 / 22 times respectively, maintaining the “overweight” rating of the company.
Risk tips
Capacity expansion is less than expected; The downstream prosperity is lower than expected; Industry competition intensifies.
