Main points of investment
The company mainly hits the feed and discharge valve with a comprehensive range of products. Founded in 1995, located in Qingdao, Shandong Province, the company is mainly engaged in the design, research and development, production and sales of water supply and drainage valves, which can meet the one-stop purchasing needs of all kinds of customers. The non-stop water gate technology developed by the company is the first in China and has reached the international advanced level.
The company's overseas revenue accounts for more than 80%, with a gross profit margin of nearly 40%. The company's overseas sales are mainly OEM, but with the improvement of its own popularity and brand recognition, the company vigorously promotes its own brand sales. From 2014 to 2016, the proportion and amount of revenue of the company's own brands increased steadily, with sales accounting for 32.94%, 35.22% and 40.32%, respectively. Sales increased from 95.5365 million yuan in 2014 to 110 million yuan in 2016. With the continuous increase of sales revenue of independent brands, the company's gross profit margin is expected to further increase. The company's fund-raising projects mainly involve large-scale, high-end valve production lines and special product lines, which are expected to further improve the company's product structure and enhance the company's competitiveness and profitability.
The global valve market will exceed US $85 billion, with a growth rate of 6.5%, and the focus will gradually shift to developing countries. The market size of the global valve industry has exceeded US $62 billion. The compound growth rate of the valve market size will reach 6.5% from 2015 to 2019, and the market size will reach US $85.475 billion by 2019. According to Mcllvaine, the average growth rate of global valve market revenue from 2011 to 2017 was 27.16%. Of these, more than 37% are in Asia and Africa, 20.65% in the Americas and 16.89% in Europe. The valve industry is gradually transferred to developing countries. The development speed of China's valve industry has surpassed that of the European Union and Japan, second only to the United States.
The global market size of water supply and drainage valves will reach nearly US $8 billion, with an average compound growth rate of 5.7%. Large-scale and high-end valves are the trend. According to McIlvaine, the proportion of demand of the water treatment industry in the global and Chinese valve markets in 2012 was 14.07% and 14.98% respectively, belonging to the second largest application area. Since 2015, the market scale of valves in municipal water use and sewage treatment has shown steady growth in both developed and developing countries, and the average compound growth rate from 2004 to 2019 is expected to be 5.7%.
By 2019, the global market for water supply and drainage valves will reach US $7.866 billion.
Profit forecast and investment advice: we predict that the company's EPS from 2017 to 2019 will be 1.03 / 1.29 / 1.59 yuan, respectively, an increase of 33.16% / 25.98% / 22.72% over the same period last year. With reference to the valuation of the comparable company, we think it is reasonable to give the company 20-25 times PE in 2017, with a corresponding price range of 20.60-25.75 yuan.
Coverage for the first time, no rating for the time being.
Risk Tip: the risk of sharp fluctuations in raw material prices, product promotion is not as expected.