Boshen Co., Ltd. is one of the leading enterprises in China's diamond tools industry, specializing in the research, development and production of diamond tools, power tools, alloy tools and other products. In November 2017, the company completed the acquisition of Taurus Grinding and expanded its business to the field of coated abrasives. In August 2020, the company acquired Haiwei locomotive and became an A-share listed company with the production, sales and R & D capabilities of brake pads and brake discs for EMU. At present, the company's business covers three areas: Diamond tools, coated abrasives and rail transit equipment parts.
Revenue-profit double increase, strong profitability. From 2017 to 2020, the company's total operating income and return net profit showed a trend of increasing year by year, with a compound growth rate of 34.39% in revenue and 137.76% in return net profit. In 2020, the company's revenue exceeded 1.2 billion yuan, an increase of 10.62% over the same period last year, and its net profit increased by 84.12% over the same period last year to 133 million yuan.
Traditional business is developing steadily, and overseas revenue is expected to improve. The company acquired Taurus Grinding in 2017 to expand its business to the field of coated abrasives, and its revenue grew rapidly in 2018, and then increased steadily; under the background of declining industry output, the company still achieved relatively stable growth in coated abrasive products, showing the company's strong competitiveness; in 2020, the company closed down two overseas subsidiaries and rectified the overseas diamond tools business.
The acquisition of Haiwei locomotives, the active layout of high-speed rail parts industry. In August 2020, the company completed the equity acquisition of Haiwei Locomotive, a leading EMU brake disc supplier in China, and Haiwei Locomotive became a wholly-owned subsidiary of the company. After merging the annual data of Haiwei locomotives, the operating income of the company's rail transit business was 68.6251 million yuan in 2020, with a gross profit margin of 44%, ranking in the forefront of Chinese brands.
Grasp the industry dividend, high-speed rail parts are expected to achieve import substitution. Knorr is the leader of the international brake disc industry, mainly supplying the market of Harmony, which has a stock of about 3000 trains in China. At present, the company's brake disc mainly supplies Fuxing market. With the promotion of the strategy of internal circulation in China's economy and the improvement of the marketization of high-speed rail parts, it is expected to gradually realize import substitution under the leading technology and product leadership of Haiwei brake disc.
Investment advice.
We estimate that the income from 2021 to 2023 will be 1.671 billion yuan, 2.094 billion yuan and 2.745 billion yuan respectively, with year-on-year growth rates of 29.3%, 25.3% and 31.1% respectively, and the net profit of returning home will be 225 million yuan, 285 million yuan and 399 million yuan respectively, with year-on-year growth rates of 69.3%, 26.8% and 39.7% respectively, corresponding to EPS of 0.41 yuan, 0.52 yuan and 0.73 yuan respectively. Coverage for the first time, no rating for the time being.
Risk hint
The risk of rising prices of raw materials, the business progress of rail parts and components is not as expected, and the risk of repeated epidemic situation.