Oukeyi: Some tools used in processing superalloys, titanium alloys and composite materials are used in the field of domestic large aircraft

On June 5, 2023, 688308.SH announced that from May 1 to May 31, 2023, the communication between the company and investors is as follows:

1. How to contact the tool products with the end customers?

A: strengthening the stickiness with end customers is a very effective way for tool enterprises to improve product sales and value. The closer they are to the customer terminal, the stronger the customer stickiness. On the one hand, the company rapidly promotes direct sales and whole package solutions, provides overall product solutions, participates in the on-site management of end-customer processing scenes, strengthens the contact with end-customer technicians, and strengthens end-customer stickiness; on the other hand, by setting up CNC tool stores, the company promotes end-brand Selch products to strengthen technical exchanges with end-customers and user stickiness.

2. How do you view the overall solution strategy?

A: at present, international cutting tool manufacturers provide personalized cutting solutions for user enterprises by virtue of their rich product range, in-depth understanding of customer needs and high R & D strength. In the future, the role of Chinese tool manufacturers will change, from simple tool production and supply to cutting technology and corresponding technology and product development. from a simple tool supplier to an important partner to solve machining problems for user enterprises. To provide overall machining solutions is an important strategic direction for the development of tool manufacturing enterprises, tool enterprises actively layout to improve the overall solution and comprehensive service capabilities.

3. How to open up overseas markets? What's the progress?

A: the overseas market space is huge. There is a large demand for cutting tools in Southeast Asia, Eastern Europe, Northern Europe, America and other global manufacturing and processing regions. The price advantage of the company's products overseas is very obvious, and different strategies can be adopted for different regions. The Southeast Asian market has a large number of general processing demand, which is in line with the initial export positioning of domestic cutting tools, and is the first to achieve a breakthrough; Europe and the United States market has a large number of high-end manufacturing and processing demand, the company radiates through local brand stores and exhibition promotion to quickly promote brand influence and achieve product penetration.

This year, the company has made new breakthroughs in new overseas brand stores, the number of new overseas customers, and overseas sales in Europe and the United States.

4. After the expansion of NC blade production capacity of peer companies, how to treat the price war?

答：目前，国产数控刀片处于进口替代加速阶段，产品低端化和价格战是死路，只有坚持产品和客户的高端化，坚持进口替代，在中国市场来说，才是出路。公司始终坚持产品守正创新，高质量发展，主要方向：(1)难加工材料的加工，比如高温合金、钛合金;(2)高精度加工;(3)高速、高效加工;(4)高端进口替代;(5)出口替代;(6)加工现场的解决方案;(7)刀具的整包方案;(8)智能数控刀具方案。

Therefore, the company will always adhere to high-end products and will not participate in the industry volume of low-end products.

5. What is the forecast of the prosperity and market demand changes of the tool industry this year and in the next few years?

A: in the next few years, the increasing demand of China's cutting tool market is a major trend. (1) the proportion of tool consumption in machine tool consumption will gradually increase. Modern cutting aims at improving cutting efficiency, cutting accuracy and cutting safety, and pays attention to the coordinated and balanced development of intelligent machine tools and high-efficiency cutting tools. (2) the degree of numerical control of machine tools is improved, and the consumption demand of NC cutting tools is increased. The upgrading trend of numerical control of cutting machine tools will lead to an increase in the consumption demand of CNC cutting tools. (3) the combination of machined materials and the extensive upgrading of refractory materials lead to the increase of NC tool consumption. (4) with the extension of domestic cutting tools to the high-end market, the speed of import substitution and export substitution is accelerated. (5) the substitution of cemented carbide coated NC tools for high speed tool steel and traditional indexable tools is accelerated, and the proportion of cemented carbide coated NC tools in the total tool volume will be further increased. (6) in the future, the rapid growth of downstream markets such as new energy vehicles, aerospace, rail transit, ships, energy and other downstream fields will bring about an increase in the demand for CNC cutting tools.

6. What are the changes in the acceptance of downstream middle and high-end tools to domestic brands?

Answer: middle and high-end tools, especially large terminal mainframe factories, mainly consider the consistency of cutting life, stability and tool machining accuracy for domestic blades, but rarely open to domestic tools for trial in the field of high-value parts. With the continuous upgrading of domestic tools to the middle and high end and the improvement of the technical level, this situation is improving, and there are more opportunities. Many industries have internal requirements to enhance the localization rate, and at the same time, in high-end fields such as military industry, aerospace and other high-end fields, there are also considerations of tool supply security, and the acceptance of domestic tools in downstream industries is getting higher and higher. With the increasing acceptance of domestic tools in the field of terminal applications, enterprises with channels and terminal layout will seize the opportunity to stand out.

The company has made breakthroughs in product processing scenarios in aerospace, rail transit and other high-end fields, which will promote the rapid replacement of tool products in more middle and high-end fields.

7. Which is the bigger market space for CNC blades or integral cutting tools?

A: according to the "China tool Market 2021 Import and Export calculation and recent Development", there are two types of cemented carbide tools with large production and sales volume and rapid development: one is integral cemented carbide round shank cutters (integral cutters), mainly milling cutters and drills; the other is numerical control inserts. According to the statistics of China Machine tool Industry Association, the main types of cemented carbide tools are cemented carbide inserts, milling tools, hole cutting tools, etc., of which cemented carbide inserts account for a high share of sales, reaching 54%. Milling tools and hole cutting tools are mainly integral tools, accounting for about 40%. Therefore, the CNC blade and the overall tool are equally important tool products, and the market space is larger.

8. What is the estimated production progress of the fixed increase project?

A: according to the feasibility study report of the fixed increase project, the fund-raising project is expected to reach production in 2 years, 20% in 3 years, 60% in 3 years, and fully in 4 years. After the project reaches full production, the average annual increase in operating income is about 640 million yuan, and the average annual net profit is about 128.94 million yuan. The company started the construction of the fixed increase project ahead of schedule and will release part of the production capacity this year, subject to the current production schedule.

9. Do the products involved in the company's increased projects have a market basis?

答：公司定增项目涉及的产品包括整体刀具、棒材、数控刀具、金属陶瓷刀具。

NC tool body, integral tool and cermet NC blade all belong to NC tool products. The company has established a relatively perfect dealer network of NC tool products, which can realize production capacity digestion through the existing sales channels. Because indexable tools and integral tools are often combined to complete the cutting forming of the workpiece in the process of NC machining, some end users of the company have the need to purchase integral tools at the same time. The company's overall cutting tools can be used in conjunction with the existing indexable CNC blades to continuously improve the supporting capabilities of automotive, aerospace, wind power, rail transit and other industries, and greatly enhance the company's comprehensive tool service capacity and market competitiveness.

In addition, the company has accumulated more customers of bars and serrated blades, which is helpful to digest the production capacity of high-performance bars and cermet sawteeth.

10. This year, does the company have a plan for the proportion of middle and high-end products in the sales revenue of CNC tool products, and what is the proportion respectively? Can you introduce the progress rhythm of the new NC blade and the whole tool?

A: at present, the company's new production capacity of CNC blades has been released rapidly, the product structure has been continuously optimized, and the proportion of high-end CNC blades has gradually increased. As of March 31, 2023, the sales revenue of the company's products worth more than 8 yuan accounted for more than 35%, showing a continuous upward trend. This year, the company will continue to optimize the product structure and increase the proportion of high-end products. In 2023, the company's "annual production of 40 million CNC blades intelligent manufacturing project" will achieve production, CNC blade production capacity of about 120 million pieces, the overall tool project in the refinancing project will also release part of the production capacity ahead of schedule.

11. What is the reason for the reduction in the unit labor cost of the company's CNC blade manufacturing in 2022?

Answer: the reduction in the unit labor cost of CNC blades in 2022 is mainly due to the company's "annual production of 40 million CNC blades intelligent manufacturing project" with a higher degree of automation, which is lower than the company's original production line. at the same time, the company has also made process optimization and technical improvement on the original production line to improve production efficiency.

What are the reasons for the rapid growth of accounts receivable in 2022?

Answer: the reason for the rapid growth of accounts receivable in 2022 is mainly due to the fact that China's economy is still in the recovery stage at the end of 2022, and the downstream sales and payback of customers are not up to expectations, resulting in a certain lag in our customer payback. However, the customers are professional companies engaged in tool sales earlier in China, and their downstream end customers are also very stable and do not have the risk of bad debts.

13. The company has a relatively high provision for inventory price decline. May I ask that this part of the price reduction preparation is mainly focused on cemented carbide or CNC blades. The company's sales margin of CNC blades is more than 40%, and the realized value should be much higher than the cost. Why also provision for inventory price decline?

Answer: the inventory is measured according to the lower of the cost and the net realizable value. When the expected net realizable value is lower than the cost, the provision for the decline in the price of the inventory will be included. In order to cope with the changes in the demand of the market and end-users, the company will timely launch a variety of new brands, new troughs and other products according to the needs of customers, and at the same time will form a certain number of unsalable products. For this reason, the company has prepared the corresponding inventory price reduction.

14, the company's CNC blade inventory growth rate is higher than the sales growth rate in 2022, is there a situation in which unsalable products lead to passive inventory increase?

Answer: as the average production cycle of CNC blades is about 1 month, in order to ensure the supply of end customers, the company needs to prepare a certain inventory, according to the inventory data of 2021 and 2022, there is no passive increase in inventory caused by unsalable products.

15. What is the change in the gross profit margin of the company's overseas sales?

A: from 2020 to 2022, the gross profit margin of CNC blades sold overseas showed an upward trend year by year, but the gross profit margin of sawtooth blades sold overseas declined to a certain extent, resulting in a decline in the overall gross profit margin of overseas sales. In the future, with the rapid increase in the proportion of overseas sales of CNC blades, it will be conducive to the improvement of the overall gross profit margin of overseas sales.

16. What are the precision grinding products mentioned in the company's annual report, which category is classified in the company's business classification, the average unit price and what is the company's current production capacity?

Answer: the precision grinding products in the annual report mainly refer to CNC blades processed by small parts, and the business is classified as CNC tool products with an estimated unit price of more than 10 yuan and a current production capacity of 5 million pieces.

17. What will be the future trend of the company?

A: the company is committed to becoming a China *, international well-known CNC tool integrated supplier and system service provider. On the one hand, through the development of the adaptation of the tool body and the existing NC blade, the product structure of indexable NC tool is improved, and the coordinated matching of "blade + tool body" is realized; at the same time, through the layout of high-performance bar and overall tool project, to achieve the coordination and complementarity of "indexable tool + integral tool" products, one-stop solution to customer tool needs. On the other hand, the company will continue to improve the layout of cermet blades and industrial cutting tools, strengthen the organic combination of CNC blades and superhard materials, and go deep into new energy vehicles, aerospace, wind power, shipping, rail transit and other fields. broaden the application field of cemented carbide CNC tools.

Are there any related applications of the company's products in the field of domestic large aircraft?

A: some of the company's cutting tools for processing superalloys, titanium alloys and composite materials are used in the field of domestic large aircraft. at the same time, the company will increase tool development in the aerospace field to further enhance market share.