20210201-高诚证券-津上机床中国-01651.HK-Strong_3Q21_indicating_a_strong_comeback_5页_451kb

China | Machinery - Precision Tsugami (China) Summary

Core Content

This report provides an analysis of Precision Tsugami (China), a subsidiary of Tsugami Japan, focusing on its 3QFY21 performance, financial outlook, and investment ratings. The key highlights include strong recovery in the domestic manufacturing sector, improved profitability, and a revised target price (TP) for the company's stock.

Main Points

3QFY21 Performance

• Net profit is expected to increase by 100% YoY, driven by the rebound in demand from downstream industries.
• Domestic sales reached a record high, with China accounting for 83% of 1H-FY21 sales.
• Industry data supports the recovery, with domestic production of metal-cutting machine tools growing by 32.4% YoY in December, the highest in the past 5 years.
• Machine tool imports stabilized, after a double-digit decline from 2018 to 2020, indicating resilient demand.

Tsugami Japan's 3QFY21 Summary

• China segment sales increased by 34.7% YoY to JPY33.5bn.
• Segment income surged by 97.7% YoY to JPY5.5bn.
• All major products recorded strong growth in 3QFY21.

Target Price and Investment Recommendation

• Target Price (TP) revised up to HK$10.00, implying an upside of 17% from the last price of HK$8.55.
• Maintain BUY rating, citing the company's ability to meet customer orders quickly and strong support from its Japanese parent.

Financial Forecast

Revenue Breakdown

• Precision automatic lathes increased by 39.7% YoY in 2021.
• Precision machining centres grew by 12.3% YoY.
• Precision grinding machines rose by 12.5% YoY.
• Others increased by 5.0% YoY.

Key Ratios

Performance Metrics

• 1-month return: 15.2% absolute, 11.0% relative.
• 3-month return: 24.0% absolute, 7.3% relative.
• 6-month return: 21.4% absolute, 5.6% relative.

Key Information

• Stock ticker: 1651 HK
• Market Cap (HK$m): 3,256
• 3M average daily turnover (HK$m): 1
• 52-week high/low (HK$): 9.09 / 5.33
• Free Float (%): 25.8%
• Shares Outstanding (m): 381
• Recurring EPS (CNY): 0.96, 0.41, 0.67, 0.81, 0.94
• Dividend per Share (DPS, RMB): 0.315, 0.268, 0.166, 0.204, 0.236
• Dividend Payout (%): 32.7, 65.6, 25.0, 25.0, 25.0
• BVPS (RMB): 3.713, 3.851, 4.071, 4.827, 5.708

Investment Ratings

• Fundamental Rating: Buy (B) - Potential total return over 10% for large caps, 15% for small/mid caps.
• Tactical Rating: Tactical Buy (TB) - Potential total return over 20% in the short term.
• Target Price: HK$10.00 (up from previous TP of HK$9.20).
• Upside: 17.0% from the last price of HK$8.55.

Conclusion

Precision Tsugami (China) is demonstrating a strong recovery in its 3QFY21 results, with 100% YoY growth in net profit and record domestic sales. The company is well-positioned to benefit from the rebound in the domestic manufacturing sector, supported by industry data showing accelerated growth in metal-cutting machine tools production and stabilized imports. The revised target price and continued "Buy" recommendation suggest positive expectations for future performance.