Key points of investment:
The company specializes in environmental monitoring services and industrial process analysis. Starting with an online flue gas monitoring system for the power industry and a process analysis system for the petrochemical industry, the company has been deeply involved for more than 20 years and has gradually developed into a comprehensive service provider for environmental monitoring and industrial process analysis that is now mature in China. It mainly provides solutions and technical support for ecological environment monitoring, pollution emission monitoring, and greenhouse gas monitoring. The company can also provide industrial process analysis services, extend the instrument product industry chain, and provide environmentally friendly operation and maintenance services and solutions.
The company actively lays out businesses related to carbon measurement. The company began laying out carbon metering related businesses in 2020. It has a series of related products such as intelligent carbon emission measurement systems, atmospheric greenhouse gas monitoring systems, carbon account management platforms, etc., and participated in the carbon monitoring emission system assessment pilot work organized by the Ministry of Ecology and Environment. In 2022, the company set up a joint venture with the China Institute of Metrology, Beijing Zhongji Carbon Technology Co., Ltd., with a shareholding ratio of 70%. The company will assist the China Institute of Metrology to complete the development and application of measurement technology, improve national carbon measurement standards, promote an internationally recognized carbon emission data measurement system, and accelerate China's integration with the international carbon market.
The domestic environmental monitoring equipment market is expected to continue to grow. With further results achieved in China's environmental protection campaign, various environmental indicators have improved markedly, and environmental policies have gradually shifted from pollution remediation to ecological monitoring, prevention and control. The number of environmental monitoring equipment owned and its value is expected to increase. The equipment value is expected to increase from 21.88 billion yuan in 2017 to 59.57 billion yuan in 2020, with a compound annual growth rate of 23.5%. Considering China's current economic development trend and the price drop expected to be brought about by domestic technology upgrades, it is conservatively estimated that the next few years will grow at a 10% growth rate, and the equipment value scale is expected to reach 95.938 billion yuan by 2025.
The company has a leading edge in the industry. A few listed companies in the environmental monitoring equipment industry were selected for comparison. As a leading company, Sydillon ranked among the top companies in terms of operating income and net profit of the mother in 2022, and they all increased compared to last year. However, the company's investment in R&D is also relatively high. In order to further develop component equipment adapted to the needs of different application scenarios, it has built an ecological environment monitoring platform for multiple scenarios.
Investment advice: The company's earnings per share are expected to be 0.60 yuan and 0.75 yuan respectively in 2023-2024, and the corresponding valuations are 12.94 times and 10.39 times, respectively. The company is a leading domestic environmental monitoring business and equipment research and development enterprise. It is expected to benefit from the increase in environmental monitoring demand brought about by the construction of domestic ecological civilization and the advancement of the carbon peak process. At the same time, research and development of gas analyzers and the like is expected to replace high-precision equipment imported from overseas. In addition, the domestic CCER trading market is expected to restart, and the company's performance is expected to rise in the future. Maintain the company's “increase holdings” rating.
Risk warning. Risks such as technology upgrades and substitution, policy implementation falling short of expectations, project releases falling short of expectations, and repayment progress falling short of expectations.