\u3000\u3000 Jiangsu Toland Alloy Co.Ltd(300855) (300855)
Core view
Closely following the demand for equipment development, the performance is expected to increase by 54.9% – 69.6%: Jiangsu Toland Alloy Co.Ltd(300855) released the performance forecast for 2021, and the net profit attributable to the shareholders of the listed company is expected to be RMB 169-185 million, a year-on-year increase of + 54.9% – 69.6%; The net profit attributable to the shareholders of the listed company was RMB 149-170 million, a year-on-year increase of + 57.9% – 80.1%.
Leading private superalloy enterprises benefit from the large capacity of downstream engines: the company is one of the few enterprises in China that can simultaneously mass produce deformed superalloys and cast superalloys (parent alloy and precision castings). Its products are mainly used in military and high-end civil fields such as aeroengines, gas turbines and nuclear power equipment. With the rapid growth of demand in China’s aerospace field and the acceleration of localization and substitution, the superalloy market has broad growth space. From 2017 to 2020, the company’s revenue increased from 340 million to 550 million yuan, with a CAGR of 16.6%; The net profit attributable to the parent company increased from 42.08 million yuan to 110 million yuan, with a CAGR of 37.4%. During the 14th Five Year Plan period, the company will definitely benefit from the loading capacity of engine trains and the acceleration of new model development. The initial raised investment projects “construction project with an annual output of 3300 complex thin-walled superalloy structures” and “construction project with an annual output of 1000 tons of ultra pure high-performance superalloy materials” will be completed and reach production in 2022, effectively ensuring the delivery demand.
High value-added business expansion and profitability improvement of precision castings: the company achieved a gross profit margin of 39.6% in the first half of 2021, an increase of 10.9 percentage points year-on-year; The net interest rate was 25.7%, an increase of 10.2 percentage points year-on-year. The improvement of product structure and the increase of sales proportion of high value-added products have led to the improvement of the company’s profitability. In the first half of 2021, the proportion of the company’s sales revenue of cast superalloys increased from 25.3% in 2017 to 45.4%, and the gross profit margin reached 50.7%; The sales revenue of deformed superalloys accounted for 26.9% and the gross profit margin was 30.8%. The company has leading technical advantages in the field of complex thin-walled structural parts such as gearbox, and will continue to benefit from the technical iteration of new models and domestic substitution.
Investment suggestion: it is estimated that the net profit attributable to the parent company from 2021 to 2023 will be 178 / 233 / 298 million yuan respectively, and the corresponding PE of the current stock price is 71 / 54 / 43 times. The company is a private leader in China’s high-temperature alloy industry. It definitely benefits from the large demand of downstream aviation development and the release of production capacity, which strongly supports the company’s performance growth. For the first time, it will be rated as “overweight”.
Risk warning: the risk that the growth rate of downstream demand is lower than expected; Risk of price fluctuation of raw materials; The risk of falling military prices.
