This report is read as follows:
The company is the leader of the casting industry, in the context of downstream needs to pick up, its own capital expenditure increases, income will continue to increase, while with the promotion of lean improvement, profit margins are expected to continue to improve.
Main points of investment:
Coverage for the first time, giving a "overweight" rating. The company's production capacity has increased significantly in recent years, continue to expand business boundaries, and its performance will improve rapidly. It is estimated that the EPS in 2022-24 will be 1.01,1.34,1.63 yuan respectively, corresponding to a growth rate of 35%, 32% and 22%. Based on the PE and EV/EBITDA methods, the target market value of the company is 8.672 billion yuan, corresponding to the valuation of 19.57 times in 2022, and the target price is 19.77 yuan.
Deep ploughing casting industry, mainly produces white electricity compressor, construction machinery, auto parts. The company was founded in 1999, started with the rough embryo of construction machinery parts, and gradually formed the three main industries of white electric compressor, construction machinery and auto parts. By the end of 2021, the company has 300000 tons of casting, 250 million pieces of machining and more than 250000 tons of production and smelting capacity. Under the background of the national policy of strictly controlling the increase of casting capacity and promoting replacement, the company's excellent casting capacity will continue to highlight.
Increase capital expenditure and enter a period of high performance growth. The company will complete the fund-raising of IPO and convertible bond projects in 2020 and 2021 respectively, increasing investment in casting, roughing and finishing capacity, on the one hand, ensuring future performance growth, and on the other hand, the release of machining capacity will continue to improve profit margins. 2021 the company realized revenue and return profit of 3.282 billion and 328 million, with an increase of 68.4% and 33.9%. The income and return profit were 886 million and 100 million respectively, up 49.7% and 37.9% respectively.
Make full use of the advantages of Shanxi to achieve cost reduction, excellent management and continuous efficiency. In terms of production costs, based on Shanxi's resource endowment, the company has advantages in manpower and power costs, and its manufacturing costs are significantly lower than those of its coastal counterparts, and cooperate with special electricians to actively explore the operation of green power, which is expected to maintain its manufacturing advantage for a long time. In terms of management, the company continues to promote lean transformation to improve production efficiency and process quality. As a result, the company's gross margin in 2021 is more than 5% higher than in 2019.
Risk tips: macroeconomic decline, high customer concentration, rising raw materials