1H22 performance is in line with our expectations
The company announced 1H22 results: revenue 2.67 billion yuan, year-on-year + 2.0%; return to the mother net profit of 295 million yuan, + 1.6% year-on-year, in line with our expectations. Faced with the unfavorable environment of weak 1H domestic demand and rising raw fuel prices, the company's 1H22 performance maintained growth, and the counter-cyclical was highlighted.
1) there has been a decline in product sales. 1H22 realized the foreign sales of die steel / high-speed steel / cutting tools / titanium alloy respectively 8.1 billion pounds / 1900 tons, respectively, compared with the same period last year. 2) the price of the product has increased, and the gross profit margin has decreased. The unit selling price of die steel / high-speed steel / titanium alloy / cutting tool of 1H22 company is RMB 85000 / ton and RMB 3.6 / unit respectively (compared with the same period of last year + 25.5 pound / 33.7 pound / 15.8 pound / 12.0%). Due to the poor cost transmission caused by the rise in raw fuel prices and weak domestic demand in the first half of the year, the gross profit margin of 1H22 die steel / high-speed steel / cutting tools was-8.9/-6.3/+0.4ppt to 21.5 8.9/-6.3/+0.4ppt 24.3 max 28.5%. 3) the operating cash flow is under pressure, and the exchange earnings have increased significantly. The operating cash flow of 1H22 was-210 million yuan, year-on-year-550 million yuan, mainly due to the substantial growth in export business and the increase in inventory / accounts receivable due to the extension of transportation / account period (corresponding to the provision for inventory / credit impairment of 0.25 million yuan in 1H22, year-on-year + 63.1 shock 396.6%). 1H22's exchange earnings were 39 million yuan, + 56 million yuan compared with the same period last year, mainly affected by the appreciation of the US dollar.
Trend of development
Headwind shows business resilience, and the company's products are highly competitive in the market. 1) the company's export performance was outstanding in the first half of the year. The export revenue of 1H22 die steel / high-speed steel was 112.0% to 91.0 billion yuan compared with the same period last year, reflecting the strong market competitiveness of the company's products. 2) under the background of the sharp rise in raw material prices, the company continues to raise product prices, and high-speed steel products achieve cost excess transmission (ton gross margin + 725 yuan compared with the same period last year), reflecting excellent cost transfer ability and industry pricing power.
The product structure is steadily optimized and the endogenous growth passes through the cycle. The sales volume of powder metallurgy products of 1H22 Company reached 358 tons compared with the same period last year. At the same time, the successive release of powder drills / powder taps / cemented carbide products further enriched the company's high-end precision tools; in terms of titanium alloy, the technology and market of titanium alloy materials used in glasses / 3C industry have made breakthroughs, driving the volume and price of 1H company titanium alloy products to rise. In addition, the company's 7000-ton fast forging project is being carried out in an orderly manner, and we expect the project to reach an annual output of 50, 000 tons of super-large die steel. With the steady optimization of the product structure, the gradual expansion of high-end products is expected to continue to contribute to the profit increment of the company, and we are optimistic that the company will cross the industry cycle with sufficient internal generation of long kinetic energy.
Profit forecast and valuation
Due to the adjustment of the company's business structure, the revenue of 2022max 2023e is reduced by 23.5% to 55.2 / 5.82 billion yuan; considering the increase in raw material costs, the company reduces 2022max 2023e EPS-26.1/-23.9% to 0.25max 0.33 yuan, the current share price corresponds to 2022max 2023e 9.0max 6.9x PPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPUE. Maintain the outperform industry rating, taking into account the current volatility in the Hong Kong stock market, lower the target price by-25% to HK $4.21 (corresponding to 2022max 2023e 14.3max 11.0x Pmax E), implying 60% upside space.
Risk
The price of alloy raw materials fell sharply; the macro economy fell more than expected.
