\u3000\u3000 Wuxi Paike New Materials Technology Co.Ltd(605123) (605123)
Event: the company released the performance forecast for 2021. It is estimated that the company will realize the net profit attributable to the parent company (about RMB 300 million, + 80%) and deduct the net profit not attributable to the parent company (about RMB 282 million, + 88%). In a single quarter, 2021q4 company realized the net profit attributable to the parent company (about 108 million yuan, year-on-year + 143%, month on month + 66%), deducting the net profit not attributable to the parent company (about 104 million yuan, year-on-year + 176%, month on month + 69%).
As the core supplier of ring forgings in China’s aviation, missile and other fields, the company’s 2021q4 performance has increased significantly year-on-year and month on month, which may indicate the high scenery of China’s aviation, missile and track. We believe that during the “14th five year plan” period, the company will maintain high growth in the field of aviation and missile forgings, while the forgings in the fields of petrochemical and electric power are expected to maintain stable growth. In addition, as a typical civilian military enterprise, the company has flexible mechanism and is actively arranging new energy and other fields, which is expected to open more growth poles.
1) Aerospace: military products benefit from large-scale loading of weapons and equipment, and civil products enter the industrial chain of international aviation giant. Aviation: the company’s products are aviation engine case, combustion chamber, sealing ring, support ring, etc. Military: the company’s products cover almost all military aircraft models in service and in the research stage, which will fully benefit from the high scenery of China’s military aircraft track. Civil: in 2020, the company signed 11 year and 5-year agreements with Luoluo and Ge respectively, covering a variety of models. We expect that the company’s mass supply in the field of civil aviation will open up huge growth space. Aerospace: the company’s products include missile engine case, missile shell, ring connector, rocket engine case, rocket fairing, etc. The company has in-depth cooperation with Aerospace Hi-Tech Holding Group Co.Ltd(000901) and science and industry group to participate in the supporting of long march series rockets and multi-type missiles. As a consumable equipment, the “14th five year plan” missiles will be loaded more and more, superimposed with the increasingly frequent launch of China’s aerospace rockets, which is expected to drive the rapid growth of the company’s aerospace field. Focusing on the needs of major equipment such as missiles, launch vehicles and aerospace vehicles, the company has carried out the development of a new generation of light alloy materials, especially aluminum lithium alloy and magnesium alloy forgings, made a breakthrough, actively gave full play to the manufacturing advantages of special-shaped thin-walled high cylinder parts, and further expanded the aerospace market.
2) other civilian products: the demand for petrochemical forgings is stable, and the new energy track contributes to the bright spot of future growth. Petrochemicals: the demand for flanges, tubesheets, etc. of petrochemical forgings for various equipment remains generally stable. Photovoltaic: the construction of supporting equipment in photovoltaic industry is accelerated. In 2021, the company will add forging products for supporting equipment in the photovoltaic industry. We expect that in the next two years, due to the high prosperity of the photovoltaic industry and the sharp increase in the demand for supporting equipment, the order of forging products for supporting equipment will increase rapidly.
Power: wind power and nuclear power have entered the fast lane of development, and the corresponding forging orders of the company may increase. Electric forgings are used for steam turbines and gas turbines for thermal power, nuclear power components, wind turbines and other equipment. With the restart of the approval of the nuclear power industry, it is expected to approve 6-8 units per year in the future, and the corresponding market space of nuclear power components is about 1.8 billion yuan. The development of the wind power industry has repeatedly exceeded expectations. In the future, with the development of the wind power industry, the demand for downstream forging products will further increase. The rapid development of nuclear power and wind power will contribute to the growth of the company’s demand for forgings.
Investment suggestion: as a leading enterprise of ring forgings in China, the company has significant advantages in technology, customers and qualification. Its products are widely used in aerospace, shipbuilding, electric power, petrochemical and other industries. In terms of aerospace, the company occupies high growth tracks such as aeroengines, rockets and missiles, and is the benchmark of civil military enterprises. At the same time, the IPO project is expected to solve the capacity bottleneck and significantly improve the company’s future profitability. We estimate that the net profit attributable to the parent company from 2021 to 2023 will be RMB 300 million, RMB 446 million and RMB 626 million respectively, corresponding to PE of 43.8x, 29.5x and 21.1x, maintaining the “buy” rating.
Risk warning: the demand of downstream industries is less than expected; The release of raised investment capacity was less than expected.
