Incidents:
The company announced its 2021 annual report: In 2021, the company achieved revenue of 413 million yuan, an increase of 97.61% over the previous year; achieved net profit of 59.11 million yuan, an increase of 103.25% over the previous year; and achieved net profit of 48.62 million yuan after deducting non-return mother's net profit, an increase of 234.57% over the previous year.
Comment:
1. The annual report performance is at the upper end of the forecast. The growth rate of endogenous net profit in 2021 was 30.1%. In 2021, China's machine tool industry continued the steady and positive trend since the second half of 2020. The year-on-year growth rate was high throughout the year, but the growth rate was high and low under the influence of the base figure. Affected by the industry cycle, although the company's performance growth rate slowed in the second half of 2021, it maintained high growth throughout the year. The net profit returned to the mother in the annual report and net profit after deducting the non-return to the mother were all at the upper end of the previous performance forecast range. Since the opening of the wholly-owned subsidiary Nanjing began merger in February 2021, excluding the impact of the merger, we estimate that the company's endogenous net profit in 2021 was about 37.84 million yuan, an increase of 30.1% over the previous year.
2. The revenue of the laser product line increased 55% year-on-year. I am optimistic that future share will continue to increase. In 2021, the company integrated the product system organizational structure into a metal cutting product department, a laser processing product department, a home improvement manufacturing product department, and a servo product department. The revenue growth rates of each product division in 2021 were 38%, 55%, 20%, and 33% respectively. The laser product line led endogenous growth. On the one hand, sales in the laser cutting equipment industry have maintained high growth in recent years; on the other hand, the company received market recognition for its laser cutting motion control system in 2021, and has now formed a complete product matrix. Through in-depth cooperation and differentiated development with leading customers, the market share has increased rapidly. We believe that the company's share is expected to continue to increase in the future.
3. After the acquisition, Nanjing opened a high performance. Nanjing, a wholly-owned subsidiary of the company with broad room for growth in the direction of high-end, opened a motion control system for positioning CNC machine tools to fill the company's gap in the field of CNC lathes. At the same time, through technical empowerment, the company enabled Nanjing to develop in the direction of high-end turning and milling composite. The motion control system was the core of the “industrial mother machine”, and there is broad room for domestic growth of high-end CNC machine tools. In 2021, the opening of Nanjing achieved revenue of 139 million yuan, an increase of 115.65% over the previous year, and net profit of about 22.62 million yuan, an increase of 376.2% over the previous year. Weihong's empowering role is already evident.
Profit forecasts and investment suggestions: We are optimistic that the market share of the company's laser product line will continue to increase, and we are optimistic about the growth of domestic high-end CNC machine tools. Based on the 2021 performance, we adjusted the company's 2022/2023 revenue forecast from 615/819 million yuan to 540/676 million yuan, and the estimated 2024 revenue was 826 million yuan; the 2022/2023 net profit forecast was adjusted from 168/226 million yuan to 0.77/100 million yuan. The estimated net profit for 2024 is 126 million yuan, and the 2022-2024 net profit corresponding to the current stock price PE is 3606/28.04/22.09 times, respectively, maintaining “Buy” rating.
Risk warning: Industry prosperity fell short of expectations; laser cutting product development and customer expansion fell short of expectations; industry competition intensified; the opening and development of the subsidiary Nanjing fell short of expectations.