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Sifangda: Oil tablets and blades are expected to grow rapidly next year
The oil composite sheet business is expected to grow at a high rate next year. The main reason for the slow growth of the company's petroleum composites this year is that Russia's major customers have had some problems themselves; this year's centralized production expansion, equipment commissioning and personnel training have not fully followed. This is also mentioned in our previous report. The company plans to launch high-end HR oil products to domestic and foreign markets. The quality of HR oil tablets is close to that of foreign composites, but the price is 80% of foreign homogenous products, and the market competitiveness is strong. Considering the large space for China's petroleum composite sheets to replace imported and substitute roller drills, and the market development of new products HR composite sheets, it is expected that the company's composite sheet business growth rate is expected to exceed 80% next year, and the gross profit margin is expected to increase. The composite sheet business for tools is progressing well. At present, the 2-inch blade has been sold in small quantities, but the blade thickness control is not very satisfactory, which has a certain impact on sales performance. The company plans to import high-end testing equipment to enhance the quality control of the blade. The company's blades are mainly used in the wood processing field. Therefore, the real estate industry has a great impact on the company's business. It is expected that the revenue of the composite sheet business will decrease. With the improvement of the quality of 2-inch blades and the enhancement of market development, it is expected that the composite sheet business for tools will increase by more than 40% next year. However, considering that the company may cut prices next year to seize market share, the gross profit margin of the composite sheet for cutting tools may decline. We expect the machining sector to be the future direction of the company. The business of mining composite sheets and wire drawing blanks has developed steadily. Compared with petroleum composite sheets, the composite sheet for mining has a low technical content and is not the main business development direction of the company. The technical barrier of the drawing die blank is higher, but it is very durable and the market size is not large. These two businesses are relatively stable and stable. The over-raised project will be gradually released in the next year. The first phase of the fundraising project has been basically completed. Equipment for mining PDC picks and DTH drill bit industrialization projects will be in place. It is expected to start production in 2012 and release capacity in 2013. We believe that the overcapacity of the synthetic diamond industry next year, the shrinking market demand will lead to a price drop, which may reduce the company's cost, which is a good thing for the company. It is estimated that the growth rate of the company's operating income in 2011-2013 is 6%, 31%, 37%, and the net profit growth rate is -4%, 45% and 41%, respectively, and EPS is 0.46 yuan, 0.67 yuan, 0.94 yuan. We are still optimistic about the company's development prospects for a long time, but due to the current high valuation, we maintain the “Neutral-A†investment rating for the time being. Risk warning: the risk of a decline in economic growth; the risk of a temporary decline in gross profit margin brought about by the expansion of production; and the unfavorable risk of opening up the market.