Incident Overview
The company released its 2021 semi-annual report, achieving operating income of 803 million yuan, an increase of 49.99% over the previous year; achieving net profit of 105 million yuan to the mother, an increase of 111.91% over the previous year.
Analytical judgment:
Revenue & performance have both increased, and profitability has greatly improved
Benefiting from the merger of Haiwei Locomotive and the good growth of its coated abrasives and diamond tools business, the company achieved operating income of 803 million yuan in the first half of 2021, an increase of 49.99% over the previous year; it achieved net profit of 105 million yuan, an increase of 111.91% over the previous year. By product, the revenue of the company's coated abrasives sector was 473 million yuan, up 57.35% year on year. Revenue share increased by about 2.75 percentage points to 58.86% year on year; hardware tool sector revenue was 261 million yuan, up 19.79% year on year, and revenue share decreased 8.19 percentage points year on year to 32.52% year on year; rail transit equipment parts sector revenue was 57.055 million yuan, up 783.31% year on year, and revenue share increased to 7.10%. In terms of profitability, the company's gross margin declined, and net interest rate increased slightly. The company's gross margin in the first half of the year was 28.51%, a slight decrease of 0.88 percentage points over the previous year. By product, the gross margin of the company's coated abrasives/hardware tools/rail transit parts was 19.35%/38.33%/52.38%, respectively, with year-on-year changes of -2.95/0.29/48.54 percentage points respectively. The company's net interest rate increased 4.01 percentage points year-on-year to 13.30% in the first half of the year, and overall profitability increased significantly.
Production and sales in the traditional business are booming, and rail transit parts development has entered a new stage 1) With the increase in user and market recognition of the company's main product, ceramic abrasive products, product sales continued to increase in the first half of 2021; 2) In the hardware tool business segment, Thai subsidiaries are currently supplying normally, and supply is normal in North America. In addition, in response to rising raw material prices, the company adjusted the prices of some products in the first half of the year to partially absorb the pressure of rising costs; 3) In the first half of the year, the company continued to promote the loading and application assessment of powder metallurgy gates for CRH380A, CR400AF/CR400BF, CR300AF/CR300BF, etc., which were certified last year, while strengthening contacts with the Railway Administration to promote gate maintenance and refurbishment business. In addition to the market for new cars and brake discs required for maintenance of the “Fuxing” EMU, we will actively promote the expansion of the “Harmony” EMU brake disc market and the urban rail subway brake disc market, and develop and sell cast products such as heavy vehicle parts.
Investment advice
Keeping the profit forecast unchanged, revenue for 2021-2023 is expected to be 1,671 million yuan, 2,094 million yuan and 2,745 million yuan respectively, with year-on-year growth rates of 29.3%, 25.3% and 31.1% respectively; realized net profit of 225 million yuan, 285 million yuan and 399 million yuan respectively, with year-on-year growth rates of 69.3%, 26.8% and 39.7% respectively. The corresponding EPS is 0.41 yuan, 0.52 yuan and 0.73 yuan respectively.
Risk warning
The risk of rising raw material prices, the rail transit parts business falling short of expectations, and the risk of repeated epidemics.