Integrated manufacturer of precision parts from China to the world
Yingpu Precision is an integrated manufacturer of key castings and machined parts with high precision and high complexity, mainly engaged in investment casting, precision machining, sand casting and surface treatment. According to the prospectus, the company is the seventh largest independent investment casting manufacturer in the world and the fourth largest precision machining enterprise in the world. The company's revenue in 2018 was HK $3.75 billion, of which the investment casting sector earned HK $1.58 billion, accounting for 42.2%, which is the company's main business. The company implements the "endogenous + epitaxial" two-wheel drive strategy and actively expands its global distribution. In 2018, the proportion of income from the United States, Europe and China was 42.0%, 32.6% and 22.9%, respectively.
Multi-advantages build core competitiveness and gradually expand into aviation and medical fields.
The company's downstream customers focus on leading enterprises in various industries, cooperate for an average of 14 years, and provide one-stop solutions in the product life cycle, these advantages constitute the company's core competitiveness. In terms of business operation, there is still a large gap between the company's income scale and per capita output value compared with the global leader, but the growth rate is relatively fast, with an income growth rate of 23% in 2018, and the gross profit margin remains stable. The terminal market of the company's existing business includes automobiles, hydraulic equipment, construction machinery, high-horsepower engines, etc. In recent years, the company has made breakthroughs in the aviation and medical fields around technology research and development, with a compound growth rate of 34% in aviation market revenue in the past three years. It is expected to improve the development space.
Profit forecast and investment rating: as a comprehensive manufacturer of precision components, with the continuous optimization of domestic factory manufacturing process and the release of production capacity in Mexico and Turkey, the company is expected to increase profitability and global market share. We predict that the company's operating income in 19-21 is expected to reach HK $42max 46 / 4.9 billion; EPS is HK $0.351 per share and HK $0.467 per share respectively. The company has stable operation, global business layout, high domestic industrial status, active layout of the terminal industry, and gives the company a reasonable valuation of 13 times PE in 2019, corresponding to a reasonable value of HK $4.56 per share, with reference to the valuation level of comparable companies. For the first time, it covers the investment rating given to "buy".
Risk tips: Sino-US trade friction risk; end market cyclical changes due to macroeconomic impact; rapid rise in raw materials affecting corporate profitability; overseas market business risk and exchange rate risk.
