Events:
On April 26, Kuncai Technology released its annual report for 2020 and the first quarter report for 2021, showing that the company's operating income in 2020 was 750 million yuan, an increase of 21.54 percent over the same period last year, and its net profit was 157 million yuan, an increase of 6.97 percent over the same period last year. In the first quarter of 2021, the company realized a net profit of 44 million yuan, an increase of 24.54% over the same period last year, and basic earnings per share of 0.094, an increase of 24.50% over the same period last year.
Comments:
Domestic revenue has increased significantly and market share has increased steadily. During the reporting period, from a regional point of view, the company's domestic revenue and gross profit margin reached 492 million yuan and 35.83%, respectively, an increase of 32.94% and a decrease of 7.52 pct over the same period last year, while overseas revenue and gross profit margin reached 256 million yuan and 47.49%, respectively, up 4% and 1.16pct over the same period last year. The increase in revenue and the decline in gross profit margin are mainly due to the fact that the company relies on the ultra-high performance-to-price ratio of the Moore brand, which not only increases the sales of Moore products, but also drives the sales of products, effectively enhancing the domestic market share and brand stickiness.
The project will actively increase investment and financing and take the lead in technological innovation. The net investment cash flow of the company in 2020 was-398 million yuan, an increase of 56.11% over the same period last year, and the net cash flow of fund-raising was 183 million yuan, an increase of 8.20% over the same period last year. The increase in cash flow of investment and financing is mainly due to the increase in payments for the construction of projects and the purchase of land, as well as an increase in long-and short-term loans at the same time. And the financial expenses of the company in 2020 increased by 372.96% to 12.8733 million yuan compared with the same period last year. The side shows that the company's project is being carried out actively. During the reporting period, the company's R & D expenditure reached 2680 yuan, an increase of 32.65% over the same period last year. The company has continuously increased its R & D investment in the past decade, and titanium dichloride has achieved mass production, which not only ensures the need of pearlescent materials for major raw materials, but also reduces the company's raw material costs and improves competitiveness.
The production capacity planning is clear and the future prospect is broad. The company is under construction of 424 million yuan in 2020, an increase of 332.78% over the same period last year. In the future, it is planned to build a project with an annual output of 500000 tons of high-end titanium dioxide and 400000 tons of high-end ferric oxide. The progress of Zhengtai project in 2020 is close to 30%, and it has begun trial production of a production line with an annual production capacity of 200000 tons. at present, the price of high-end titanium dioxide is maintained at about 20,000 yuan. if the production capacity is put into operation as scheduled, it can fully extend the industrial chain and enrich the product line, and improve the company's market competitiveness.
Give the company a "buy" rating. Adjust profit forecast and valuation in view of the construction of the company's titanium dioxide project. It is estimated that the return net profit of the company in 2021-2023 will be 4.18-13.58-plus 27.57 yuan, and its EPS will be 0.89-2.90-5.89 yuan in 2021-2023.
Risk tips: capacity investment is not up to expectations, profit forecasts and valuations are not up to expectations.
