Company profile: The company is one of the few domestic enterprises with integrated production of gas meter base meters and intelligent control devices. Although the intelligent rate of gas meters in China has exceeded 70%, NB-IoT gas meters account for only about 10%. The company's integrated R&D and production capacity guarantees the high performance and relatively low cost of the company's products. We expect that with the launch of IPO production capacity (production capacity after IPO expansion is 2.5 times that of 19 years), the company's company size will double in 2-3 years. The company's customers cover more than 700 gas operators in 29 provinces, municipalities directly under the Central Government and autonomous regions across the country. More than 300 gas operators have used the intelligent gas meter integrated management system developed by the company. The company has provided cloud services to more than 90 gas operators to meet their intelligent operation and management needs.
The growth of the gas meter industry is mainly due to the exogenous demand brought about by the growth of the natural gas industry and the endogenous demand brought about by this round of product upgrades for NB-IoT IoT gas meters to replace IC meters. In terms of exogenous demand: In terms of exogenous demand, China's natural gas accounted for only 7% of primary energy consumption in 2018, which is a big gap with the world average of 23.4%. It is expected that the share of natural gas in primary energy will increase significantly in the next ten years. At the same time, demand for gas meters will follow; in terms of endogenous demand: Applications such as smart water meters, smart gas meters, and smart smoke sensors brought about by the promotion of NB-IoT began in 2018. With the acceleration and improvement of the NB-IoT network, the process of NB-IoT meters replacing smart meters with IC cards is expected to accelerate, and the gas meter industry will also accelerate. Rapidly entering the NB IoT gas meter era.
The company's R&D technical advantages+integrated structural design capabilities have built a strong moat for the company.
The company's key technical indicators in the field of gas meter manufacturing are superior to European, American and Japanese standards. By the end of 2019, the company had 92 invention patents and set 17 national standards, far higher than comparable companies. The company has world-leading gas meter technology and industry standard setting advantages. The technical indicators of the company's products in terms of intelligent metering and intelligent valve control are in a leading position in the industry and the world. They are superior to European standards and Japanese standards in terms of indicators such as electromechanical conversion errors, electronic metering errors, switching valve current, switching valve time, service life of electromechanical valves, and valve leakage. The company was limited by capital and production capacity scale earlier. Existing production capacity can no longer meet the company's order requirements. We expect that after raising capital for this IPO, the company's capital strength will increase, the scale of production capacity will increase 2.5 times, R&D investment will increase, the product structure will be rich, the overall information technology capacity will be improved, the marketing network will be improved, and the market competitiveness will further improve.
Profit forecast and investment rating: We expect the company's EPS in 2020-2022 to be 0.39, 0.57, and 0.79 yuan respectively, and the corresponding PE is 59, 39, 29 times. Considering the accelerated promotion of NB-IoT in the context of smart cities, the company, as a company with integrated design and production of smart gas meters, will fully benefit from the dividends brought by industry product upgrades. Therefore, for the first time, we have covered the company's “purchase”
ratings.
Risk warning: NB-IoT network promotion falls short of expectations; the release of the company's production capacity falls short of expectations, and the company's orders fall short of expectations