09/04/2020

Sun and Moon (603218) Investment Value Analysis Report-Wind Power Casting Leaders Will Meet Price and Price Rise

Sun and Moon (603218) Investment Value Analysis Report-Wind Power Casting Leaders Will Meet Price and Price Rise

The company is a leader in the domestic casting industry. The scale of supply and demand for wind power castings is shrinking in the country’s wind power installation. The company has the advantages of capacity scale, product structure and cost advantages, and it is expected to usher in a gradual and flexible increase in volume and price.

The company’s EPS for 2019-2021 is expected to be 0.

88/1.

40/1.

70 yuan (corresponding to PE is 24/15/13 times), given a target price of 25.

2 yuan (corresponding to 18 times PE in 2020), the first coverage gives a “buy” rating.

Leading in the casting industry, performance growth accelerated.

The company is the largest casting manufacturer in China, with a casting capacity of 30 tons (plus 10 tons of new production capacity to reach the end of the year), and also has a large nodular cast iron casting capacity of 110 tons.

The company’s wind power casting business accounts for about 70%. In 2018, the domestic market share of wind power castings was nearly 30%, and the global market share was about 14%.

With the restart of the wind power industry, the company’s performance in 2019H1 has accelerated its growth, with revenue / net profit growth rates of 50% / 82% respectively.

The wind power boom continued to pick up, and the injection molding machine industry grew steadily.

Wind power: Under the replenishment of wind power and the transition to the bidding mode, the 67GW onshore wind power inventory projects approved before the end of 2018 are expected to be installed intensively by the end of 2020. It is estimated that domestic wind power installations will be about 28 / 35GW in the next two years; meanwhile,It is estimated that the installed scale of domestic offshore wind power will reach 2/3 in 2019-2021.

5 / 5GW, exceeding the expectations of the “13th Five-Year Plan”.

With the steady decline in the cost of wind power, it is estimated that the global wind power installed capacity is expected to reach more than 70GW in 2019 and 2020, corresponding to an annual demand for castings of about 150 tons, and the supply and demand layout in the industry is tightening.

Injection molding machine: The domestic injection molding machine and related casting industry have entered a stable development period, and the prospects are promising under the driving of environmental protection and new energy automobile industry.

The company has significant advantages in scale and accelerated expansion.

The company’s casting capacity is the first in the industry. It basically maintains full production 淡水桑拿网 and sales. The maximum production capacity is about 30% ahead of the second-tier enterprise, which is conducive to reducing production costs and increasing the added value of the product. Gross profit margin continues to be 5-15 pcts ahead of other manufacturers.

Driven by the growth of its own production capacity and downstream demand, the company’s core wind power casting products have gradually ushered in rapid growth. It is expected that the sales volume in 2019/2020 will increase to about 25/36 offset, corresponding to a CAGR of nearly 60% (2018 wind powerSales of castings 15.

1 initial).

Cost pressure was eased, production capacity and product structure were optimized, and profitability improved.

With the stabilization of the prices of raw materials such as scrap steel and pig iron, the pressure on the cost of 杭州夜网 castings has eased significantly. At the same time, the company has gradually improved the production capacity of castings, promoted the subcontracting of external processing to replace internalization, and strengthened its cost control capabilities. Corresponding gross margin improvement space is about 3.

8.

In addition, the company’s large MW castings and overseas wind power castings generally enjoy a product premium of 20% -40%, and gradually adjust the structure and continue to optimize, in order to promote the gradual increase in gross profit margin, and achieve the volume and price increase of elastic growth.

Risk factors: The wind power industry’s rush-installation is less than expected; the cost of raw materials has risen; the company’s capacity release has fallen short of expectations; order confirmations have fallen short of expectations.

Investment suggestion: It is expected that the company’s net profit attributable to the mother in 2019-2021 will be 4 respectively.

7/7.

4/9.

0 million, corresponding to EPS predictions of 0.

88/1.

40/1.

70 yuan (corresponding to PE is 24/15/13 times), given a target price of 25.

2 yuan (corresponding to 18 times PE in 2020), the first coverage gives a “buy” rating.