Core views:
Haomai Technology is a tire mold leader, with a global market share of over 30% in 2023. The 2007-2023 revenue/net profit CAGR was 21.84%/19.93%, and performance growth was steady. Reviewing the company's development history, the company has focused on machinery manufacturing for 30 years, gradually expanding its application scenarios. From an invisible champion in the field of single tire molds, it has grown into an industry leader in various fields such as wind power castings, gas turbines, and CNC machine tools. We believe that the company is a defensive investment target with steady performance. The tire mold and mechanical parts business provides stable performance support, and the machine tool business is expected to open up the company's growth ceiling.
First growth curve: Invisible champion in tire molds, stable leading position, contributing to stable performance support.
In 2023, the tire mold business revenue was 3.79 billion yuan, accounting for 53%. The tire mold has the properties of consumables and has a usage cycle of 1-2 years. Industry demand comes from: ① upgrading after reaching the service life; ② upgrading with increased tire pattern diversity requirements. We expect a compound growth rate of 5% in 2023-2026. The company is the hidden champion in the tire mold industry. According to our estimates, the company's share of the global market in 2023 will reach 34%. The company actively explores overseas markets, accounting for 46.25% of overseas revenue in 2023 (mostly tire molds). The future sector business is expected to continue to provide stable performance support for the company.
Second growth curve: Demand for gas turbines is booming, and the company is expected to continue to benefit.
In 2023, the large parts business (wind power castings+gas turbine parts) generated revenue of 2.77 billion yuan, accounting for 39%. Wind power tendering is low; benefiting from peak demand for electricity, gas turbines continue to be booming. According to data from the Forward-looking Industry Research Institute, the 2023-2026 gas turbine demand CAGR is 4.2%, which is expected to drive a continued high increase in demand for upstream components. The company has the comprehensive advantage of integrated casting. In terms of production capacity, according to the company's official website, the company's cast iron and steel production capacity in 2022 was 240,000 tons and 10,000 tons respectively, ranking second in the industry. In terms of customers, the company has established stable cooperative relationships with foreign-funded wind power and gas turbine leaders such as GE, Mitsubishi, and Siemens. As the company's production capacity shifts towards the high-margin gas turbine business, the product structure continues to improve, and profitability is expected to increase.
Third growth curve: the dark horse of new high-end machine tools, domestic substitution opens up room for growth.
In 2023, the CNC machine tool business revenue was 308 million yuan, accounting for 4%. On March 6, the director of the National Development and Reform Commission said that last year, China invested about 4.9 trillion yuan in equipment in key fields such as industry and agriculture. As high-quality development progresses further, demand for equipment renewal will continue to expand. Preliminary estimates are that it will be a huge market with an annual scale of more than 5 trillion yuan. The policy helps a new round of equipment renewal and iteration. Under the catalyst of renewal demand superimposed on domestic substitution, machine tools are expected to fully benefit. The company started with the machine tool business and has accumulated a large number of machine tool R&D and production capabilities in the mold field, leading in the domestic scale of machine tool product performance and production capacity. At the same time, the company has self-control capabilities for core functional components such as direct-drive turntables, and has the advantage of being autonomous and controllable in terms of production costs and delivery cycles. In 2022, the company officially sold high-end CNC machine tools to foreign countries, and in 2023, the machine tool business achieved revenue of 308 million yuan, +111.76% over the same period last year. We are optimistic about the rapid expansion of the company's machine tool sector, which is expected to accelerate the domestic replacement of high-end machine tools.
Investment advice:
We expect the company's revenue for 2024-2026 to be 82.87, 94.47, and 10.587 billion yuan respectively, with year-on-year growth rates of 15.64%, 14.00%, and 12.07% respectively, net profit of 17.32, 19.42 billion yuan, and 14.04% respectively. The corresponding PE is 17X/15X/13X, respectively. Considering the steady growth of the company's main business and outstanding new business growth, we will give 2024 PE 19X valuation, corresponding to a 6-month target price 41.04 yuan, covered for the first time, giving an investment rating of “increase holdings -A”.
Risk warning: rising raw material prices, risk of exchange rate fluctuations, lower downstream capital expenditure than expected, risk of CNC machine tool expansion falling short of expectations, risk of profit forecasting falling short of expectations.