2022H1, the company achieved revenue of 500 million yuan (year-on-year + 36.7%), and net profit / deduction of non-return net profit was 100 million / 95 million yuan (year-on-year + 26.3% Universe 36.7%). In the 22Q2 quarter alone, the company achieved revenue of 270 million yuan (year-on-year + 35.3%), net profit of 64 million yuan (+ 37.7%) and non-return net profit of 60 million yuan (+ 56.9%). We are optimistic that the company will continue to expand capacity through fundraising projects and integration of Liyuan Jinhe, and the company is expected to drive into the fast lane and maintain its "buy" rating.
Financial overview: accelerated performance growth, exceeding market expectations. (1) single quarter situation: 2022Q2 single quarter, the company achieved revenue of 270 million yuan (year-on-year + 35.3%), return to the mother net profit of 64 million yuan (year-on-year + 37.7%), strong growth. (2) Gross profit margin: 2022H1's gross profit margin and net profit margin were 35.6% and 20.2% respectively, compared with the same period last year. The gross profit margin of the company was 36.7% in a single quarter, rising for the third consecutive quarter.
If you deduct the merger and acquisition of Liyuan Jinhe (Liyuan Jinhe is still in the period of integration, 22H1 lost 7.6 million yuan), the company's profit performance is even better. Subsequently, if the price of raw materials falls, the company's profits are more flexible, or it is expected to achieve a simultaneous rise in volume and profit. (3) expenses: 2022H1, the company's investment in sales, management and R & D is 5 million yuan, 30 million yuan and 30 million yuan respectively, which is + 25.4%, + 15.9% and + 25.6% respectively compared with the same period last year. The rate of sales, management and R & D expenses is 13.1%, year-on-year-1.7pcts. Financial expenses year-on-year-1.7pcts, mainly due to the increase in exchange earnings during the period.
Overseas manufacturing demand is booming, and production capacity continues to be released. (1) Compressor: 2022H1 achieved revenue of 340 million yuan (year-on-year + 19.2%), making progress steadily. The company is one of the largest commercial compressor parts manufacturing base and export enterprises in China, and has established a good cooperative relationship with Johnson controls, Ingersoll Rand and other global leading manufacturers in the field of compressors for more than ten years. Fully benefit from the downstream customer supply chain transfer trend to the Asia-Pacific region, demand is expected to maintain steady growth. (2) Construction machinery: 2022H1 achieved revenue of 120 million yuan (+ 94.0% compared with the same period last year), and the new production capacity went hand in hand with the integration of Liyuan Jinhe capacity. Caterpillar Inc is a global leader in construction machinery, and the company has a solid strategic cooperation relationship with it, which won Caterpillar Inc's Best Cooperation Model Award in 2021. The company has broad room for improvement in key customers. (3) Wind power: in the face of the rapid development and surging demand of wind power market, according to the company's investor relations activity record table, the company has added large-scale wind power parts projects to Zhejiang Mingde fund-raising project, and the research and development of new products with downstream customers are also in the testing stage. (4) capacity expansion is gradually landing:
According to the company's investor relations activity record table, "34800 sets of high-precision machinery parts technical renovation project are added every year."
It is progressing smoothly and will be fully put into production this year. The company also makes full use of Liyuan Jinhe casting capacity index to establish resin sand casting capacity. In addition, the "annual production and construction project of 14600 sets of large-scale and high-precision mechanical parts"
The company is expected to put into production by the end of 2023, which will fundamentally solve the capacity bottleneck.
The prospect of Suzhou Liyuan, a shareholding company, is worth looking forward to. Suzhou Liyuan is one of the earliest enterprises engaged in hydraulic pump production in China, with profound technology accumulation. After the company's capital increase, Suzhou Liyuan will continue to cultivate the hydraulic business, increase research and development and product upgrading, expand the proportion of high-end hydraulic parts, and expand the customer base. The improvement of profitability is worth looking forward to.
Suzhou Liyuan hydraulic business and the company's original casting business are expected to achieve good synergy.
Risk factors: the risk of lower-than-expected performance of mergers and acquisitions and participating companies; the risk of sharp fluctuations in raw material prices; the risk of capacity expansion that is not as expected; the risk of downward macroeconomic growth; the risk of losing important customers; the risk of intensifying trade disputes between China and the United States.
Investment suggestion: the company is a leading "casting + machining" integrated manufacturing enterprise in China, with excellent product quality and outstanding supply chain management capabilities to establish a solid cooperative relationship with the world's top equipment manufacturers. The company will actively expand production through mergers and acquisitions and fund-raising projects, which is expected to fully meet the downstream demand and grow rapidly. We maintain the company's 2022 and 23-year net profit forecast of 230 million and 300 million yuan, and increase the 2024 net profit forecast of 400 million yuan, and the current price corresponding to PE is 24, 18 and 14 times respectively. Considering that the company is expected to achieve rapid performance growth in the next two years, and as the fund-raising project is put into production and generate revenue at the end of 2023, it is expected to continue to achieve high growth, and there is broad room for long-term downstream expansion.