According to our analysis, the unit price of the company is similar to that of other companies, but its profitability is better than that of its peers, mainly due to higher efficiency and yield. The company's barriers lie in: (1) original hot paste + wheel coating sizing process, resulting in more economical materials, better air tightness, and higher production efficiency; (2) equipment suppliers customize equipment according to the requirements of the company. (3) the self-production rate of the company's base cloth is higher, and the cost is more advantageous; (4) there are more types of subdivided products with higher gross profit margin in airtight materials.
The future cost space of the company lies in: (1) in the short term, the batch production of fund-raising projects is expected to drive airtight materials to maintain a compound annual growth rate of 30-50% in the next 3-5 years; (2) in the medium term, the increase in the proportion of income and efficiency of airtight materials leads to an increase in gross profit margin; (3) in the long run, material prices have fallen sharply since 17 years, which is expected to expand the scope of application of airtight materials.
We estimate that the income from 2021 to 2023 will be 656, 823,025 million yuan, respectively, and the net profit will be 1.92 million, 2.45 and 310 million, respectively, and the EPS will be 1.92, 2.45, 3.1 and 38.05, respectively, corresponding to PE on September 22, 2021, which is twice that of 20-16-12. The first coverage will give a buy rating and target price of 49.09 yuan (corresponding to 20 times for 22 years).
Industry analysis: the application of airtight materials continues to expand, and the competition pattern is expected to reach US $1 billion and CAGR 15% in the global wiredrawing air cushion market in 2025.
At present, the industry is divided into three parts: Watson Technology, Mingshida and China Longtian Group.
Company advantage: master production core link technology, strong profitability 1) process advantage: original hot paste + wheel coating sizing process + solvent-free size; 2) equipment advantage: equipment supplier customizes equipment according to company requirements, efficiency is higher than that of the same industry; 3) the self-yield of base cloth is high: it has two links of gross profit margin and better profitability.
Growth driven: expand production in the short term, improve efficiency in the medium term, and expand downstream applications in the long run.
1) the expansion of wiredrawing base cloth leads to the expansion of wiredrawing air cushion production capacity; 2) the increase of the income proportion of high gross margin airtight materials leads to the increase of overall gross profit margin; 3) there is still room for improvement in human efficiency.
Risk tips: airtight material price decline risk; industry competitors to enter the risk; put into production not as expected risk; downstream application expansion is not as expected risk; systemic risk.