Main viewpoints

The reform of central enterprises: deepening the market-oriented management mechanism, the semi-annual report first mentioned to stimulate the enthusiasm of key staff and boost the vitality of management.

CRRC Corporation put forward the "one core, three poles and many points" business structure with rail transit equipment as the core, wind power equipment, new energy vehicles, new materials as important growth poles and several business growth points in the 14th five-year Plan goal. as the new material industry platform of CRRC, its rail transit vibration reduction and noise reduction is the first in the world, the wind turbine blade industry ranks second in the country, and the automobile vibration reduction field is the third in the world. Under the new strategic background, the company's position in the group may be greatly enhanced.

CRRC Corporation comprehensively deepened the reform of the market-oriented management mechanism, and his enterprises carried out medium-and long-term incentives flexibly. Time New Materials this year's semi-annual report first mentioned "through a variety of ways to stimulate the enthusiasm of key staff", fully mobilize the vitality of management.

Rail traffic plate: rail traffic damping business is developing steadily, expanding to the industrial damping field with high magnificence, the foreign market is advancing by leaps and bounds, and the domestic market is steady; with the introduction of mandatory policies, the industrial damping boom is high. The organizational structure of the company has been adjusted to develop the field of industrial shock reduction and isolation. In 2020, new orders for earthquake resistance of buildings increased by 150 million, and the capacity utilization rate of building vibration isolation products reached 99.68%.

Wind power plate: high prosperity of racing track, coordinated development of industrial chain, digital and new material enabling blades, high certainty of growth.

Under the guidance of the carbon Neutralization Declaration, the wind power installation center is expected to move up to more than 50GW during the 14th five-year Plan period. The company's wind power blade sales volume ranks second in China, and the customer structure at home and abroad is excellent. In recent years, the company has actively reduced costs and increased efficiency by means of digital factories, research and development of polyurethane blades, and is expected to usher in performance improvement in 2022.

The group's parent company lists the wind power sector as a pillar business, with a sales income of 32.335 billion yuan in 2020. As the second largest blade manufacturer, the company benefits from the growing demand for wind power blades from the parent company. From 2018 to 2021H1, the company's internal sales revenue reached 9.93,16.07,29.59 and 1.498 billion yuan respectively, accounting for 8.28%, 14.29%, 19.62% and 19.64% of the company's revenue respectively, showing an increasing trend year by year.

Automotive sector: strategic transformation, improved profitability

The automobile industry chain tends to develop steadily and transform to new energy in structure. From 2018 to 2020, the proportion of China's total output of new energy vehicles increased from 4.51% to 5.20%. The company actively adjusted its product structure and increased the research and development of new energy, lightweight and other damping products. It has entered the supply chain of electric vehicle products of domestic and foreign first-tier brands. The controlling shareholder CRIC strategically bought a stake in Germany's Borg to support New material Germany in building low-cost regional production capacity and developing its business in China, and the overall profitability of the automotive business is expected to improve.

New materials plate: aramid technology market breakthrough, high strategic value to meet the import substitution company to continue to promote a series of polymer new material project reserve and incubation. Aramid paper has achieved technological breakthroughs, and some of the achievements have been applied in bulk in aerospace and other fields, such as the "Tiangong" space station, Fuxing and the EMU of Harmony, to achieve domestic substitution. From 2019 to 2020, the company's revenue of aramid products was 20.23 million yuan and 30.02 million yuan respectively, a year-on-year growth rate of 600% and 48% respectively. Revenue in the first three quarters of 2021 was 57.65 million yuan, and it is expected to more than double for the whole year. With the introduction of war investment, the plate will usher in an acceleration of development.

Profit forecast and investment suggestion

At present, the wind power sector by the high level of raw materials, tender prices continue to decline, gross profit margin continues to decline. With the correction of raw material prices, the price increase of finished products and the implementation of measures to reduce costs and increase efficiency, gross profit margins are expected to rise. Due to lack of cores, rising prices of raw materials and high overseas labor costs, the automobile sector has continued to lose money in recent years, but the range of losses has been narrowed. With the transfer of the company's orders to low-cost factories and the implementation of measures such as expanding sales share in the Asian market, the profitability of the sector will be improved; the rail sector still maintains steady growth and is the "ballast stone" of the company's performance. Industrial shock absorption is a new growth point; new materials sector is limited to the long investment cycle, there are still some losses. The company has now introduced strategic investors into the supply chain of relevant companies, the scale effect is prominent and the loss rate is greatly narrowed, and will enter the profit channel. We expect the company's operating income to grow by-3.9%, 15.6% and 14.3% respectively from 2021 to 2023, and its home net profit to grow by-39.9%, 136.3% and 52.3% respectively, corresponding to PE valuations of 47x, 20x and 13x, respectively. Cover for the first time, giving a "buy" rating.

Risk hint

The risk of continuous rise in the raw material end of wind turbine blades; the risk of repeated epidemics and the depression of the automobile industry; the risk that the promotion of industrial shock absorption products is not as expected; the risk of insufficient awareness of domestic products in the new materials market and the risk that sales fall short of expectations.