I. Overview of events
On May 18, the company announced that the powder metallurgy brake disc (dovetail universal type) (BSD2501 type) developed by the 200-250km/h EMU has been approved by the engine Department of China Railway Corporation and approved to carry out loading and operation examination in the CRH5A-5060 EMU attached to the EMU of Beijing Railway Bureau.
II. Analysis and judgment
1. The high-speed rail brake pad business has made a new breakthrough, which is expected to become a new profit growth point for the company. the loading examination of the EMU approved in Beijing this time is another important progress in the PM brake pad product certification of EMU following the official certification of powder metallurgy brake pad (non-dovetail type) of 300-350km/h and above EMU. The company won a sales contract of 2000 tablets (4.03 million) in January this year, with an existing production capacity of 30,000 tablets per year, and is expected to reach 110,000 tablets per year by the end of the year.
2. High-speed rail brake pads consumables attribute, imported replacement space is larger than 2897 EMU units in 2017. each train is replaced three times a year, and the price of each brake pad is 2000 yuan. at present, the stock market is 1.4 million pieces, and the market scale is 2.8 billion yuan. it is estimated that it will reach 1.85 million pieces by 2020, and the market space will reach 3.7 billion yuan. From the perspective of the competition pattern, German Knorr currently occupies more than 70% of the market share, while domestic Tianyi accounts for 20%. Boshen tools is one of the few listed companies in the industry to achieve real sales. From the perspective of industry attributes, high-speed rail brake pads have the industry attributes of consumables, which are replaced three times a year, and the demand is stable. We expect that with the rise of Boshen tools in the field of high-speed rail brake pads, it will have a significant impact on the existing competition pattern, and it is expected to form a tripartite pattern of Knorr, Tianyi Shangjia and Boshen tools in the future. Assuming that in the future, according to the market share of 1max 3, the market space of Bishen tools in brake pads is about 1 billion yuan.
3. Changzhou Taurus has strong synergy with the main industry, which will contribute stable cash flow. Changzhou Taurus ranks among the top three in the field of coated abrasives, with a promised net profit of 97.5 million yuan in 2018 and a consolidated profit in 2018, which will significantly increase the company's performance and is the main source of performance growth this year. Recently, funds have been raised to build two new production lines, with a 50% increase in production capacity, which is expected to provide the company with stable cash flow.
Third, profit forecast and investment suggestions
It is estimated that the company's net profit from 2018 to 2020 will be 1.34,1.92 and 242 million yuan respectively, corresponding to 39,27 and 22 times PE and 0.33,0.46 and 0.59 yuan EPS respectively, maintaining a "highly recommended" rating.
IV. Risk hints
The price of high-speed rail brake pads fell; the loading test fell short of expectations; and the promised performance of Taurus grinding fell short of expectations.