Daming International is a leading service provider for metal material processing and high-end equipment manufacturing in China. The company cooperates deeply with steel mills. Baowu Iron and Steel Group is an important shareholder of the company, accounting for 16.66% of the shares, and has an advantage in upstream resources. The company's scale and technology are also ahead of the industry, a wide range of customers, and can continue to expand new industries, effectively smooth the cycle of different industries, while maintaining a high capacity utilization rate. The management team has rich experience and excellent track record. The company achieved satisfactory results in the first quarter of 2021, and its net profit in the first quarter has reached more than half of last year's net profit. The company plans to add 10 machining centers in the future, bringing the total number of machining centers to 20. In the next five years, the company aims to achieve 100 billion dollars in revenue, 500 million US dollars in export business, and further raise the net interest rate to 2%. It is recommended to pay attention.
Summary of the report
The country's leading metal material processing and high-end equipment manufacturing supporting service providers. Daming International (1090.HK) is a leading service provider for metal material processing and high-end equipment manufacturing in China. The company purchases stainless steel and carbon steel raw materials from steel mills and provides customers with full-process processing services, including cutting, cutting, groove prefabrication, grinding, forming, welding, heat treatment, spraying, machining, final assembly. The company has ten processing centers located in Wuxi, Hangzhou, Tianjin, Wuhan, Taiyuan, Zibo, Jingjiang, Taian, Qianzhou and Jiaxing. According to the process, the company's business can be divided into processing business and manufacturing business, according to raw materials, can be divided into stainless steel products and carbon steel products. The company serves more than 30 customers in more than 30 industries, including machinery, petrochemical, household hardware and electrical appliances, automobile and transportation, construction, renewable energy and other fields. Among them, the machinery industry is the largest source of customers, accounting for 34% of total revenue. The company serves more than 70,000 customers and more than 20,000 active customers, including a number of industry leaders.
Excellent performance in 2021. Revenue in 2020 was 35.1 billion yuan, down 1% from the same period last year, and net profit was 347 million, up 96% from the same period last year. The revenue in the first quarter of 21 was 9.56 billion, up 53% from the same period last year, and the net profit was 210 million, reversing losses over the same period last year, and the net profit in the first quarter had reached more than half of last year's net profit.
Investment highlights:
In-depth cooperation with steel mills, leading upstream resources. Baowu Iron and Steel Group is an important shareholder of the company, accounting for 16.66% of the shares. Thanks to the support of shareholders and more than 30 years of continuous hard work of the company, the company has formed deep cooperation with many upstream steel manufacturers. 80% of stainless steel business and 30% of carbon steel business have moved forward, reducing the company's financial pressure and the risk of steel price fluctuations. At the same time, the company and some steel enterprises jointly establish R & D centers and industry-university-research bases, and jointly invest in the construction of processing centers to further consolidate the company's advantages in high-end steel processing and manufacturing.
The scale is far ahead, constantly opening the business ceiling. The threshold of metal processing industry is low and the competition is fierce. The company covers a large number of industries, and continues to expand new industries, effectively smoothing the cycle of different industries to ensure that capacity utilization is maintained at a high level. At the same time, the company provides full-process services for ten processing links, especially in the processing and manufacturing of high-strength steel, super-large steel, complex steel and other products, which expands the scope of services that the company can serve, thus being able to obtain more orders. this is the embodiment of the advantage of industrial scale. The company is in an absolute leading position in the field of stainless steel processing, with a market share of 8%. Since 2013, it has entered the field of carbon steel processing. With its scale and technical advantages, its business has developed rapidly, and it will continue to expand its business boundaries in the future.
The management team has rich experience and excellent track record. The company has a team of experienced experts, team members from peers and the upper and lower reaches of the industrial chain, patented technology, production management and other aspects have a very deep understanding and insight. The company has also hired more overseas experts to guide the company's operation. At the same time, the company is also actively inviting third-party consulting agencies to further improve the efficiency of operation and management.
The blueprint for future development is grand. The company plans to add 10 machining centers in the future, bringing the total number of machining centers to 20. At the same time, it will continue to improve the factory building of the Jingjiang base, increase the production capacity of the manufacturing base, and complete the construction of the logistics base, so as to realize the connection between the factory building and the waterway transportation of the Yangtze River. It is expected that the annual capital expenditure will be about 500 million yuan in the future, mainly from operating cash flow and partly from financing in the capital market. In the next five years, the company aims to achieve 100 billion dollars in revenue, 500 million US dollars in export business, and further raise the net interest rate to 2%.
At present, the PE-TTM valuation of the company is 8.8x, which is still lower than that of Hong Kong stocks and US stocks. There is room for valuation to rise, so we should pay attention to it.
Risk factors: steel price fluctuations affect the company's profits; industry competition intensifies; the cooperative relationship with steel mills has changed; the progress of capacity construction is not up to expectations; the shrinking financing environment leads to tight cash flow.