Jiangsu testing industry leader, internal vitality is further stimulated. The company is a leading private testing enterprise founded in Changzhou, Jiangsu Province, with testing as its main business, collaborative engineering services and material sales to form a systematic business. From 2017 to 2021, the company's revenue CAGR reached 18.2%, and the return net profit CAGR reached 52.0%, all of which maintained a relatively high growth rate. By the end of the third quarter, the company had a total of 700 million yuan in currency, with an asset-liability ratio of only 15.8%. Sufficient capital reserves and expansion table space laid the foundation for expansion. The team of the company is smart and capable, and the equity incentive that the company has just completed further stimulates the internal vitality.
The testing industry has a broad space, and the improvement of leading concentration is the trend of the times. In 2021, the revenue of China's testing industry reached 409 billion yuan, and the CAGR in seven years reached 14.5%. At present, the industry concentration is low, and high-quality enterprises have strong expansion potential. Large-scale testing institutions at home and abroad often expand their business territory and industry areas through new establishment, mergers and acquisitions and other means; the revenue share of the six head testing enterprises represented by companies has increased from 2.5% in 2014 to 3.8% in 2021, and the market share of high-quality enterprises is on the rise. The company's advantageous field of construction and engineering testing accounts for 26.4% of the testing market, and the stricter requirements for institutional qualifications and the increase in demand for green and stock building testing will also be conducive to the growth of head testing enterprises.
Remote expansion is actively promoted, and R & D results are changing with each passing day. The company's business has expanded to nine provinces and cities across the country, and has entered the surrounding international markets such as Vietnam. 51.5% of its revenue in 2021 comes from outside Changzhou City. The company will use 130 million yuan to raise funds for regional laboratory construction, continue to promote regional expansion. With continuous R & D investment, the company's testing parameters have increased from 4929 in 2019 to 7861 in 2021, and more areas of testing parameters are expected to expand in the future.
Give a buy rating with a target price of 39.54 yuan. We predict that the company's EPS for 2022-2024 will be 1.04 pound 1.29cm 1.63 yuan respectively, and the CAGR for the next three years will be 22.0%. Select the testing industry of China Test, Poni Test and other companies as comparable companies, corresponding to the PE valuation multiple of 38.0x, corresponding to the target price of 39.54 yuan, to give the buy rating.
Risk hint: the market expansion is not as expected; the profit level of the extension has declined.