Main points of investment:

The operation is growing rapidly, the product structure is improving, and the profitability is improved. 1) H1 Company realized revenue of 1.048 billion yuan, an increase of 30.58% over the same period last year, of which Q2 revenue was 510 million yuan, with month-on-month changes + 2.88% and 5.14%. Commercial vehicles and non-road machinery business development continues to grow, market share increases, product structure optimization; passenger cars, the company exclusively supplies BYD hybrid model crankshaft, order demand has greatly increased, becoming a new growth point of crankshaft business. The total revenue of the two major crankshaft companies of H1 company Guilin and Xiangyang was 585 million yuan, an increase of 32.05% over the same period last year; the revenue of the gear and forging subsidiary was 128,378 million yuan, an increase of 50.18% and 22.17% over the same period last year, and the business growth momentum was good. The gross profit margin of H1 company is 26.94%, which is 29.53% higher than the same period last year and 4.51/5.04pct is 29.53% higher than the same period last year, mainly due to the increase in income scale and the improvement of product structure. 2) the H1 company achieved a net profit of 119 million yuan, an increase of 34.60% over the same period last year, of which Q2 was 57 million yuan, down 3.44% from the same period last year, mainly due to a decrease of 14.91 million yuan in other income (government subsidies) and an increase of 20.14 million yuan in non-operating expenses over the same period last year, deducting non-net profit of 63 million yuan, an increase of 13.40% compared with the same period last year. H1 net interest rate 11.37%, year-on-year increase of 0.34pct Q2 to 11.17%, compared with the same month-on-month decline of 0.73/0.39pct. During the H1 period, the expense rate decreased 2.84pct compared with the same period last year, and the cost was well controlled.

New customers and new products work together to support the future growth of the company.

While achieving remarkable results in the development of new products for old customers, the company is also actively developing new customers and has become a supplier of crankshafts and blanks to large international enterprises such as Mercedes-Benz, BMW, Volvo, Renault Nissan, Cummins, Hino, Yema and MTU, and has entered the customer supply system of SAIC GM, Sinotruk, Fukuda Cummins and so on. At the same time, the company is also actively developing the matching market of new energy vehicles, in which the crankshaft matching of BYD hybrid new energy models has increased; in addition, it has obtained the project of crankshaft blank forgings of SAIC general hybrid new energy vehicles. As the company continues to promote the internationalization of customers, the high-end products and the expansion of non-road machinery accessories, the product structure will continue to improve in the future (at present, the proportion of non-road machinery supporting products revenue and international customer income has reached 30%). Market share is expected to continue to grow, profitability will continue to improve. Among them, the company is gradually expanding the matching strength of domestic joint venture commercial vehicles and international high-end passenger vehicles forged steel crankshafts, which will become an important growth point of the company in the future.

Enter the field of large crankshaft and enjoy the rise of quantity and profit in the future.

The company has established a joint venture with Alfen, Germany, the world's largest independent supplier of large crankshafts, to lay out the large crankshaft market, which is mainly used in many fields such as ships, construction machinery and nuclear power generator sets, with considerable overall market space and high unit price and profit margin of large crankshafts. Therefore, the company actively develops the large crankshaft matching market, which will help to improve the company's growth space and profit margin in the future. In the first half of the year, Foda Alfen's revenue was 13.8 million yuan, an increase of 10.77% over the same period last year. It has achieved bulk supply to MTU and Wasilan in Germany, and accelerated the development of new markets such as Cummins, Caterpillar, China Shipbuilding heavy Industry, Weichai and other new markets, and strive to make a breakthrough this year, and the neat business trend continues to improve.

Layout precision forging business, help international high-end customer development, reduce cost and increase efficiency

Fuda forging, a wholly-owned subsidiary, is mainly engaged in precision forging products, which effectively extends the company's product industry chain, improves the company's technology and equipment level, helps to reduce costs and increase efficiency, and helps to open up high-quality customers on the outside. Fuda forging revenue and net profit increased rapidly in the first half of the year. With the completion of the upgrading project of digital and intelligent forging technology and the construction of large crankshaft blank forgings, the matching capacity of precision forgings of the company will continue to be significantly improved in the future. thus further help the company to achieve the dual goals of international high-end customer development and cost reduction and efficiency.

Profit forecast, maintain "overweight" rating

We estimate that the company's EPS in 2021-23 is 0.42 PE 0.61 yuan per share, corresponding to 2021-23 PE is 19-15-13 times, the company's active developers take advantage of the high-end market to expand supporting non-road machinery, while large-scale crankshaft market development is about to usher in a new breakthrough, future growth space is open, product structure and profitability are expected to continue to improve, to maintain the "overweight" rating.

Risk tips: automobile production and sales downturn exceeded expectations; chip shortage exceeded expectations; customers and large crankshaft market development was lower than expected; steel prices rose more than expected