Zhuzhou UKO is a professional enterprise engaged in the research, production and sale of CNC tools products and cemented carbide products. Its cemented carbide CNC blades are installed on CNC machine tools and can be used for turning, milling and drilling. UKO can provide CNC blades that meet international standards and customer customization, including pvd/cvd coated blades, industry-specific CNC blades, complex cutting blades, etc.; the carbide products it produces are mainly serrated blades and wafers, which are processed by downstream enterprises It is made of cemented carbide saw blades, disc milling cutters and other cemented carbide cutting tools.
The processing objects of carbide saw blades are solid wood, plywood and other wooden plates and plastic products, which are mainly used in furniture, home improvement, metallurgy, construction and other industries. Carbide wafer processing objects are stainless steel, titanium alloy, heat-resistant alloy and other materials, mainly used in glasses, automobiles, paper, electrical appliances and other industries.
The Growth Logic of CNC Tools Industry
In the past three years, UKO’s cemented carbide CNC tool business has developed rapidly, from revenue of 133 million yuan in 2017 to 256 million yuan in 2019. Therefore, the development of the industry where the CNC tool business is located is increasingly important to OKE.
Carbide CNC tools produced by UKO are in the industry of CNC tools. Compared with traditional standard tools, CNC tools have the characteristics of “high precision, high efficiency, high reliability and specialization”, which adapts to the flexible development trend of advanced manufacturing. Developed countries in Europe, America, and Japan first applied CNC tools to the automotive industry and achieved great results, and then quickly spread them to all walks of life. CNC tools became the mainstream of the tool industry in developed countries.
All along, China’s cemented carbide cutting tools are mainly low-end. Of the 16,500 tons of cemented carbide produced in 2007, 4,500 tons were used for cutting tool production, the number is equivalent to that of Japan, but the value of the finished tool is only 800 million US dollars, which is far less than the 2.5 billion US dollars in Japan.
The financial crisis in 2008 brought a great impact to domestic low-end tool processing enterprises, and CNC tool companies that positioned mid-to-high-end machining needs gained development opportunities. With the determination of the “13th Five-Year Plan”, China’s The advancement of intelligent manufacturing has enabled the cutting tool industry to further develop into the high-end sector.
After 2012, the ratio of China’s total annual tool consumption to the total annual consumption of machine tools has gradually increased, reaching 22% in 2018, indicating that China’s tool consumption is upgrading and upgrading. The total annual tool consumption in 2018 reached 42.1 billion yuan, exceeding 40 billion in 2011 The highest point in history has set a record in history.
At the same time, it is necessary to understand that CNC blades used for stainless steel processing are UKO’s core products. Therefore, through the observation of the stainless steel industry, it can be speculated whether the growth logic of the CNC tool industry is based on total growth or quality improvement?
Stainless steel is widely used in various fields of resident life and national economy due to its good corrosion resistance, high temperature resistance and other characteristics. my country is the world’s largest stainless steel producer. The output of stainless steel crude steel increased from 11.256 million tons in 2010 to 26.708 million tons in 2018.
The total amount of downstream demand is constantly increasing, but the revenue growth of the tool market does not match it. This shows that the tool market, especially CNC tools, mainly benefits from the price increase right after the tool quality is improved.
It is worth noting that according to the “China Iron and Steel Industry Adjustment and Upgrading Plan (2016-2020)”, the state will focus on supporting major technical equipment in the fields of high-tech ships, marine engineering equipment, nuclear power, advanced rail transit, power, aerospace, machinery and other fields The research and development and industrialization of high-end steel products required continue to increase effective supply.
It is no coincidence that such a time planning node coincides with the growth inflection point of the tool market in 2016. This means that in the growth of the industry, it is necessary to benchmark the data “the ratio of tool consumption to machine tool consumption in developed countries is stable at 40%”, but based on the 22% domestic tool machine tool consumption ratio in China in 2018, its Can the growth reach 40%? Or is it that my country’s economic structure may not be able to support the 40% level?
Growth Logic of Welding Tool Industry
Both the welding blade and the CNC blade belong to the hard alloy blade, and the hard alloy sawtooth blade belongs to the welding blade. In 2018, carbide saw blades accounted for 47.1% of revenue, which is UKO’s largest source of income.
The main application field of carbide saw blades is the furniture industry, so Ou Keyi’s business mainly depends on the development of the furniture industry. Since 2018, due to the tightening of real estate policies and the Sino-US trade war, the domestic furniture manufacturing industry has performed relatively weak, which has caused UKO’s revenue in this field to decline in fiscal 2019, from 3.2 in 2018 100 million yuan fell to 280 million yuan in 2019.
In the future, whether UKO carbide saw blades can grow further depends on whether the level of urbanization can be further improved and the extent to which residents’ consumption is upgraded. At present, there is still some uncertainty in the growth of this business.
Market Competition and Stock Prices
According to the statistics of the China Tungsten Industry Association, the output of cemented carbide CNC blades of domestic enterprises in 2019 was about 240 million pieces, and the output of UKO CNC blades ranked second in domestic enterprises, second only to Zhuzhou Diamond.
In the competition with international counterparts, Sandvik Group, Kennametal Group, Iscar Group and other representatives of European and American tool manufacturing companies occupy a high market share in the high-end application market, especially in the aerospace and military industries. Among them, the market share of cemented carbide, high-speed steel cutters and other material products produced by the subsidiaries of Sandvik Group has consistently ranked first in the world; Japanese and Korean cutter companies represented by Japan’s Mitsubishi, Japan’s Kyocera, and Korea’s Tec In particular, Japanese tools account for a large proportion of imports in China. Among them, CNC tools produced by Mitsubishi Japan have the largest market share in Japan, and also have a greater influence in the global market.
Due to the early establishment, long industrial chain, and strong brand influence, foreign-funded enterprises occupy a large share in the domestic CNC tool market. The advantage of Oukeyi is that the performance of the core product stainless steel/steel processing blades has reached the international advanced level; The overall performance of industrial grade sawtooth is comparable to that of imported products.
It is only quite possible to replace some overseas brands with the advantage of cost performance, but to achieve rapid and large-scale replacement requires Oukeyi to make greater progress in the technical parameters of its own tools, and even achieve leading in certain fields.
In addition, UKO may also need to carry out technical layout in the field of non-carbide cutters, although cemented carbide cutters are still the mainstream of international applications.
If UKO is successfully approved for listing, from the short-term stock price performance, its market speculation opportunities should not be underestimated. The enterprise worthy of reference is Wald Diamond, which was listed on the science and technology board in the early stage, which is also an enterprise engaged in the CNC tool industry.
It should be noted that although Wald showed an amazing increase at the beginning of the listing, its background is the first batch of science and technology board companies and the appropriate listing time, then UKO as the nth batch of science and technology board listed companies and uncertain The timing of listing may not guarantee that UKO will gain the same market attention.
To Sum Up
Overall, UKO’s long-term growth value is worth looking forward to, but there are still uncertainties in the growth of some businesses. At the same time, if the market gives a higher market valuation in the early stage, then there is a high probability of facing a long value return like Wald. Today, Wald’s stock price is still on the way of value return.