crs管理层会议：全面解读-聚焦资产完整性推进

Sheila Kahyaoglu * | Equity Analyst+1 (212) 336-7216 | sheila.kahyaoglu@jefferies.comGreg Konrad, CFA * | Equity Analyst+1 (212) 284-2391 | gkonrad@jefferies.comEllen Page * | Equity Associate+1 (212) 323-3381 | epage@jefferies.comKyle Wenclawiak * | Equity Associate+1 (212) 323-7671 | kwenclawiak@jefferies.comSource: FactSet, Jefferies Continued on the next page...Please see important disclosure information on pages 7 - 11 of this report.This report is intended for Jefferies clients only. Unauthorized distribution is prohibited. Reading Leading the Charge for CRS.Today CRS is capable of producing 500 different types ofalloys, with minor tweaks supporting up to 15,000 different variations. The Reading, PA facility isthe largest of CRS' nine domestic plants, having the capability and scale to support all steps in themanufacturing process across all its end markets. The steel facility on site requires just 7 workersto maintain operation, being the most automated of CRS' facilities. While this automation doessave significant material labor costs, it is not necessarily moving the needle for CRS, given COGSis 50% weighted toward materials / 20% labor / 30% electricity/other. The Latrobe, PA location, isa smaller version of Reading without the hot working capabilities. Athens, GA has another facilitythat is primarily focused on nickel bullet, with VIM capacity being commissioned on site (targetedcommissioning in FY28 - summer 2027). By comparison, the Hartsville, SC location has no meltingcapability on site, being more focused on oil & gas and semi applications.Exhibit 3 - CRS Historical Adj Operating Margin - Targeting 27.5% Margin in FY27 From 16.3% in FY24, Drivenby Price/Mix.9.8%5.0%13.1%8.6%-20%-15%-10%-5%0%5%10%15%20%20142015Operating Margin (%)Source: Company dataUnderstanding the Melting Process.During the manufacturing process, CRS materials undergo twomain melting steps. The first is Electric Arc Furnace (EAF) melting, where electric arcs are used tomelt scrap metal under intense heat. When melting in open air, CRS also uses vacuum inductionmelting (VIM), which creates a vaccum that is then filled with inert gas to reduce contamination.VIM processes tend to produce higher-purity products with precise control over the chemistry,temperature, and atmosphere under when the metals are melted.From Melting to Purification.After the primary melting process under one of the two mentionedprocesses, the metals move to a secondary melting phase for purification to refine the properties ofthe metal to ensure it meets the customer specifications. The first of two frequently used processisElectro Slag Remelting (ESR), which remelts a metal ingot in a molten slag bath under controlledconditions. This produces high quality steel & super alloys with improved cleanliness, homogeneity,and mechanical properties. CRS also usesVacuum Arc Remelting (VAR), which is optimal for ultra-high-quality products used in aerospace and medical applications. This process remelts a metalelectrode under a vacuum using an electric arc. By the end of the purification process, CRS will havethe precise metal//alloy chemistry required to meet its customer requirements. Once purified, themetal moves to hot working where CRS uses a 4.5K-ton press to shape the metal and create itsinternal structure.Please see important disclosure information on pages 7 - 11 of this report.This report is intended for Jefferies clients only. Unauthorized distribution is prohibited. 2.8%5.4%8.8%10.1%1.2%-16.8%-1.4%5.2%11.7%8.5%8.0%10.6%12.5%9.1%-8.4%-2.4%7.2%16.3%201620172018201920202021202220232024Op. MarginAdj. Op. Margin Exhibit 4 - CRS Domestic Facilities.LocationReading, PALatrobe, PAAthens, ALOrwigsburg, PAElyria, OHHartsville, SCWashington, PAVienna, OHClearwater, FLSource: Company DataOperating in a Supply Constrained Market.Today, the market continues to operate in anundersupplied market, limited by limited capacity and long lead times (now extending out over 60weeks on average). If CRS were to announce a new facility today, it would likely take 3 years tobuild and commission, with all equipment and material having to be qualified. Given the extendedtimeline to bring capacity online, having a keen understanding of market demand trends and wherethe industry is going is crucial for management to capture share. As part of this, management isproactively evaluating means to flex the existing asset base and potential insource where possibleto meet the fluctuations in market demand. By 2029, CRS expects new aircraft builds to reach about30-35% higher than pre-pandemic levels seen in 2019. By comparison, our estimate for Airbus/Boeing production totals 1,974 aircraft in 2029, or 27% above 2019 levels (+12% above 2019 by 2027on our est).Exhibit 5 - JEF OE Rate Expectations - Airbus & Boeing Build Rates are 12% Above 2019 Levels by 2027 and+27% by 2029.-2004006008001,0001,2001,4001,6001,8002,00020192020Estimated Airplane Builds12-27%+increase on previous highSource