原材料涨价叠加下游需求较弱，公司利润短期承压。根据公司年报及一季报，利润端：2023年公司毛利率16.87%，同比-0.66pct；净利率4.61%，同比-0.44pct。2024Q1 公司毛利率14.16%，同比-3.07pct，净利率2.71%，同比-1.25pct。2023 年以来，终端市场需求持续低迷，行业竞争加剧导致公司产品价格承压，同时钨精矿等原辅材料价格持续上升，双重挤压下公司盈利空间收窄。费用端：2023 年销售/管理/研发/财务费用率分别为3.20%/4.66%/4.06%/0.39%，同比分别+0.28/-0.15/+0.89/+0.13pct，公司研发投入力度不断加大，为可持续、高质量发展蓄力。2024Q1 公司销售/管理/研发/财务费用率分别为2.96%/3.89%/3.74%/0.73%，同比分别-0.52/-0.62/+0.59/+0.23pct。Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 12.736 billion yuan, a decrease of 2.63%; net profit to mother was 485 million yuan, a decrease of 9.36%. The performance was in line with expectations. In the 2023Q4 quarter, the company achieved operating income of 3.188 billion yuan, an increase of 2.55%; realized net profit to mother of 169 million yuan, an increase of 24.33% over the same period. 2024Q1 achieved revenue of 2,967 billion yuan, a decrease of 2.95%; realized net profit attributable to mother of 63.8533 million yuan, a decrease of 35.97%.
Comment:
Production collaboration throughout the entire industry chain, product & technical advantages continue. According to the company's annual report, in 2023, the company produced about 14,000 tons of hard alloy products, ranking first in the world, and the scale advantage continues. By product category, the company 2023.1) Cutting tools and tools: revenue of 3,057 billion yuan, -7.85% year-on-year, gross profit margin of 33.58%, year-on-year -0.90pct. In 2023, the company produced about 140 million CNC blades, accounting for about 20% of the total domestic production. Among them, the newly launched Pangu series uses high-hardness substrates with advanced coating technology, which has a longer lifespan, higher processing accuracy, wider processing range, and higher processing efficiency, reaching world-class levels; 2) Other hard alloys: revenue of 3.431 billion yuan, -2.64% year-on-year, gross profit margin of 14.11%, -0.17pct; 3) Refractory metals: revenue of 2.172 billion yuan, +23.49% year-on-year, gross profit margin of 10.43% 2.39pct; 4) Powder products: revenue of 2,537 billion yuan, +7.80% YoY, gross profit margin 7.10%, YoY -1.58pct.
The increase in raw material prices compounded weak downstream demand, putting pressure on the company's profits in the short term. According to the company's annual report and quarterly report, profit side: in 2023, the company's gross profit margin was 16.87%, -0.66pct year on year; net profit margin was 4.61%, -0.44pct year on year. 2024Q1's gross profit margin was 14.16%, -3.07pct year on year, net profit margin 2.71%, and -1.25pct year on year. Since 2023, demand in the terminal market has continued to be sluggish, and increased competition in the industry has put pressure on the company's product prices. At the same time, the prices of raw and auxiliary materials such as tungsten concentrate have continued to rise, and the company's profit margin has narrowed under double squeeze. Cost side: The sales/management/R&D/finance expense rates in 2023 were 3.20%/4.66%/4.06%/0.39%, respectively, +0.28/ -0.15/+0.89/+0.13pct, respectively. The company's R&D investment continued to increase, making efforts for sustainable and high-quality development. 2024Q1's sales/management/R&D/finance expense rates were 2.96%/3.89%/3.74%/0.73%, respectively, -0.52/-0.62/+0.59/+0.23pct, respectively.
Actively promote the injection of high-quality assets into mines and integrate resources in the tungsten industry chain. On December 25, 2023, the company announced that it intends to acquire 100% of the shares of Kakizhuyuan Company held by Minmetals Tungsten Industry and Woxi Mining through the issuance of shares and cash payment, and the mining asset injection promised by Minmetals Group has officially commenced. Kakizhuyuan Company is rich in mineral resources, accounting for more than 30% of the country's tungsten resource reserves. This injection will help integrate tungsten industry chain resources and enhance the company's profitability.
The profit forecast was lowered and the “buy” rating was maintained. Considering that the current downstream demand for the company's products is still slowly recovering, we lowered the company's 24-25 revenue forecast to 140.6 billion yuan and 15.61 billion yuan. At the same time, since raw material prices are still high, affecting the profit level of the company's refractory metals, powder products, etc., we adjusted the 24-25 gross margin levels to 16.9% and 17.3%, lowered 24-25 and added a profit forecast for 26 years. The net profit for 2024-2026 is expected to be 5.20/6.21/731 billion yuan, respectively (the original 24/25 was 818/1,019 million yuan), and the current stock price (2024/4/30) corresponds to 2024/25/26 PE 29,25X, and 21X, respectively. Comparable to the company, Zhangyuan Tungsten Industry Wind, unanimously expects PE to be 37, 30, and 25X respectively. Considering the collaborative layout of the company's business around the tungsten industry chain, future injections by Kakizhuyuan Company will further develop synergy effects, increase the company's profits, and maintain a “buy” rating.
Risk warning: risk that market demand falls short of expectations; risk of continuing price increases for raw materials; risk that tungsten ore injection progress falls short of expectations.