Core ideas:
The company was founded in 2002, initially mainly engaged in industrial automation product research and development and sales, and then extended to the field of network energy, new energy vehicles, optical storage. At present, industrial automation and data center are the company's main business, and its main products, low-voltage frequency converters, have a leading market share among domestic brands and continue to benefit from industry growth; optical storage and new energy vehicles are growth businesses that have accelerated their expansion in recent years. Profitability is expected to improve and continue to contribute to the company's performance growth. At the same time, the company actively promotes internal governance and sets up business groups to support the rapid expansion of business.
Investment logic:
Deep ploughing for 20 years, constantly seeking new development. The core members of the company are mainly engaged in the R & D and sales of industrial automation products, expanding the business scope through the establishment of subsidiaries and mergers and acquisitions, and completing the capital increase and capital reduction plans for some companies according to market changes and company strategies. At present, the company has 16 holding companies, the division of labor of subsidiaries is clear, and many equity incentive plans enhance the centripetal force. In 2022, the company changed its organizational structure, and the industrial automation business group continued to organize and optimize at the R & D end, supply chain end and market end; at the same time, the company's new energy vehicle drive business introduced strategic investors, increased investment in photovoltaic business, and transferred minority shareholders' shares in Wuxi Elevator subsidiary. In business, the company focuses on four major business product lines: industrial automation, data center, new energy vehicle and optical storage, with a constantly rich product matrix, and is committed to becoming the world's leading solution provider in the field of industrial automation and energy power.
Industrial automation and data center business are steadily rising to build a revenue base. At present, industrial automation and data center are the company's main sources of income, of which industrial automation business accounts for more than 60%, and low-voltage frequency converter accounts for the main share of industrial automation.
1) in terms of industrial automation, the market scale of China's low-voltage frequency converter is increasing year by year, reaching 43.66 billion yuan in 2021, an increase of 9.06% over the same period last year. The company's low-voltage frequency converter takes the lead in the market share of domestic brands. In the future, it will focus on promoting industry solutions and new products for servo and PLC, continue to enhance the core competitiveness of servo and PLC, and maintain steady growth. 2) in terms of data centers, it is expected that China's computer room air conditioning and UPS market will reach 105.8 yuan and 14.54 billion yuan respectively in 2024, with a compound growth rate of 14.5% and 19.7% respectively in the past three years. The company is expected to continue to benefit from the R & D, production and application of integrated solutions for modular UPS and data center critical infrastructure.
The growth business takes advantage of the situation and contributes to the high growth of the company. New energy vehicles and optical storage are the company's growth business. The company's photovoltaic products focus on the distributed market, covering grid-connected inverters, off-grid inverters, energy storage inverters and terminal options, which can be used for grid gathering and grid connection; the new energy vehicle business is mainly commercial vehicles, and there has also been a breakthrough in passenger vehicles in 2022.
1) in terms of photovoltaic storage, the inverter accounts for about 10% of the cost of the photovoltaic power station and is one of the key components of the photovoltaic power station. under the background of the continuous high growth of the photovoltaic industry and the export price advantage of domestic inverters, the company has established a channel network covering many countries around the world, continuously iterated its products, increased its subsidiaries, and continued to increase its photovoltaic business. The revenue of 22H1's photovoltaic storage business increased by 167% compared with the same period last year.
2) in terms of new energy vehicles, the company's commercial vehicle revenue accounts for more. In 2022, the company broke through the fixed point of the passenger vehicle project and obtained orders in batches. Under the background of policy support and the "separation of vehicle and electricity" power exchange mode, new energy commercial vehicles are expected to usher in an industry explosion in the next three years. According to Sullivan, sales of new energy commercial vehicles in China are expected to grow to 1.443 million in 2026. The compound growth rate from 2020 to 2026 is about 51.1%, and the rapid development of the industry is expected to lead to the rapid expansion of the company's business.
Investment advice: the company's main business continues to grow, growth business maintains a high growth rate, sustained R & D investment, while overseas markets gradually recover. Compared with the comparable company Huichuan Technology, Blue Sea Huateng and Inball, the company's financial indicators are good, in the upper and middle reaches of the industry, the profit situation has improved in the past two years, and the growth is strong.
As of February 27, 2023, the total market capitalization of the company has reached 9.07 billion yuan, corresponding to the 2021 price-to-earnings ratio of 49.7x, corresponding to the 2022 projected price-to-earnings ratio of 33.5 x, the price-to-earnings ratio (TTM) is 50.1x, significantly lower than the average 65.6x of comparable companies. It is estimated that the company's net profit from 2022 to 2024 will be 2.71 million yuan, an increase of 48.7%, 52.5%, 29.5%, corresponding to an EPS of 0.35, 0.53 and 0.68 yuan, which is rated as "overweight-A".
Risk hints: macroeconomic and policy risks, raw material price fluctuations and shortages, growth business expansion below expectations, exchange rate fluctuations