Yingpu Precision is one of the world's top ten manufacturers of castings and machined parts with high precision, high complexity and critical performance. According to the Roland Berger report, the company is the seventh largest independent investment casting manufacturer in the world in terms of total income in 2018, the largest investment casting manufacturer in China, and the fourth largest precision machining company in the automotive, aviation and hydraulic terminal markets.
Sino-Thai point of view:
The future trend of the global investment casting market is medical, aviation and other segments: according to the Roland Berger report, the total global sales of the investment casting market increased from $11.4 billion in 2011 to $14.2 billion in 2018, with a compound annual growth rate of 3.3 per cent. North America and Europe mainly focus on high value-added products in aviation, military, medical and other industries, and surpass other regions to become the world's largest market. On the other hand, driven by the growth of the aviation and automotive divisions, China dominates the Asian market, with a total market share of more than 60% in 2018. The global investment casting market is expected to reach $17.4 billion in 2023, with a compound annual growth rate of 4.1 per cent. The share of finished investment products delivered in the automotive market increased by about 50% between 2013 and 2018, and this trend is expected to continue in the future and in other investment casting applications.
Operating results: from 2016 to 2018, Yingpu Precision realized operating income of HK $2.55 billion, HK $3.05 billion and HK $3.75 billion respectively. The steady increase in sales in the four business segments is mainly due to strong customer demand for passenger vehicles, commercial vehicles, hydraulic equipment, construction machinery and aviation terminal markets. In addition, nearly 40% of the revenue by region comes from the United States and 30% from Europe. The gross profit margin was 30.2%, 32.1% and 32.2% respectively, and the change in gross profit margin was mainly due to the scale effect caused by the strong growth of precision machining; the net profit rate was 133.3%, 13.2% and 11.0% respectively, and the decline in 2018 was mainly due to the recognition of goodwill impairment losses and listing expenses.
Valuation: based on 1.83 billion shares after the global public offering, the company's market capitalization is HK $51.3-6.05 billion, which is lower than that of its Hong Kong counterparts. In 18 years, the price-to-earnings ratio of the company is about 12.5-14.7 times, which is lower than the industry average; the price-to-book ratio is about 1.71-1.92 times, which is lower than the industry average. In terms of profitability, the 18-year ROE and ROA were 15.8% and 7.5% respectively, slightly higher than the industry average. Taking into account the company's industry status, performance and valuation, we give it a score of 60, with a rating of "neutral".
Risk hints: (1) market competition risk, (2) international trade policy, influence of Sino-US political relations.
