The dual-main business structure drives the growth, and the leaders in many fields are emerging. The company has been ploughing the field of electromagnetic wire for more than 20 years and is the leader in the field of aluminum core electromagnetic wire in China. In 2014, the company established positive Energy Electric layout reactor business, and the industrial chain extends to the downstream of electromagnetic wire. It has become one of the few core suppliers of high voltage & large capacity & large-scale air-core reactors in China. In 2017, the company acquired new Huikai, cut into the field of touch display, and created a dual main business structure of "electronic information + electric and electrical". At present, the company leads the world in the fields of UHV, special electromagnetic wire, high-end display touch screen, car networking terminal, etc., and has a number of Fortune 500 customers and global sales networks. committed to creating UHV, outdoor display, electronic license plate and other sub-areas leading.
2020 UHV construction exceeded expectations, and the bidding amount of reactors for the whole year is expected to be 9-1.2 billion yuan. The pace and investment of UHV construction in 2020 have greatly exceeded market expectations, and the annual investment is expected to reach 181.1 billion yuan. It is expected that bidding for more than seven lines will be carried out in 2020. In the historical UHV line investment, the bidding amount of a single DC / AC line reactor is generally about 300 million yuan, combined with the UHV planning in 2020, and considering that the current AC line investment is relatively small, it is estimated that the bidding amount of the reactor in 2020 is 9-1.2 billion yuan.
The advantage of Zhengneng electric reactor is prominent, and the performance elasticity of 2020 is remarkable. The company's reactor business was officially put into production in 2015 and has won tenders for core DC reactors such as Ximeng-Taizhou, Shanghai Miao-Shandong, Changji-Guquan and other core DC projects in 2016. In March 2020, the company became the only winning bidder in the bidding for UHV spare parts in 2020, laying the foundation for the annual share performance. Under the neutral scenario, if the tender amount of UHV reactor in 2020 is 900 million yuan, and under the assumption of 40% shock, 30% shock, 20% bid share, the performance elasticity of the company based on 2019 operating data is 58%, 34%, 16%, respectively.
The electromagnetic line is in the lead in China, and the increase of power grid investment leads to the expansion of demand. The power grid undertakes infrastructure investment, underpinning economic tasks, and multi-link investment such as UHV, power Internet of things, distribution network, etc., and the overall investment is expected to grow steadily in 2020, thus driving the expansion of electromagnetic line demand for primary equipment. The company is the leader in the field of aluminum core electromagnetic wire in China, and its products focus on UHV, special equipment and other high-end areas, which will fully benefit from the rising demand of the industry.
The business advantage of touch display is highlighted, and the multi-level product layout supports steady growth. With the rapid development of 5G, Internet of things and intelligent mobile terminals, the demand for touch display remains high. The company leads the domestic core business such as liquid crystal display module and touch display module, and actively arranges new fields such as outdoor display and electronic license plate. Multi-level kinetic energy to ensure long-term growth. The company's customers cover Walmart Inc, Honeywell International Inc and other top 500 enterprises in the world, and have built a global sales network, which is expected to support the steady growth of the electronic information business plate.
Investment suggestion: the company creates the double main industry structure of "power, electricity and electronic information", and takes the lead in the fields of electromagnetic lines and reactors. The UHV planning in 2020 is higher than expected, and the bidding amount of reactor is expected to increase highly. the company is the only winning bidder for UHV converter station spare parts bidding in 2020, and the annual order is expected to break out, which will contribute to a significant increase in performance; touch display demand to maintain a high demeanor, the company's forward-looking layout of large-scale areas, long-term growth is clear. We estimate that the return net profit of the company from 2019 to 2021 will reach 143,210max 277 million, EPS 0.31, 0.45, 0.60 respectively, corresponding to the closing price PE of 24.8, 16.9, 12.8 on March 20, 2020, covering for the first time and giving an overweight rating.
Risk tips: power grid investment is not as expected, UHV construction is not as expected, raw material prices risk, etc.
