Key points of investment
China's leading independent elevator brand; international elevator giants have a market capitalization of nearly 200 billion yuan, and the company's growth potential is greater than 80% of Kangli's elevator elevator business. In 2019, elevator sales were close to 30,000 units, and the domestic market share was about 3%.
The international elevator industry is concentrated. In 2019, the six major international brands Otis, Schindler, Thyssenkrupp, Kongli, Mitsubishi and Hitachi accounted for more than 70% of the global market share. The market capitalization of Kongli, Schindler, and Otis are all around 200 billion yuan. Foreign brands still account for a large share in the Chinese market. The domestic sales of Tongli, Mitsubishi, and Hitachi are 220 billion yuan, 20 billion yuan, and 18 billion yuan respectively, and the three domestic companies together account for more than 30%. The company is close to 4 billion, and there is still plenty of room for improvement.
In 2025, China's elevator market is expected to exceed 300 billion yuan, with a CAGR of 11%; the market potential after maintenance is huge 1) Real estate and rail transit will support the continued rapid development of China's elevator industry in the future. Up to now, the total rail transit mileage of various cities in their long-term plans (by 2035) has exceeded 35,000 kilometers. It is estimated that China's urban rail mileage will be added by about 4,500 kilometers in 2020-2022, which will bring 225-24 billion yuan of market space to the elevator market.
2) Demand for stock market updates and replacements will grow rapidly. Elevators are usually overhauled in 10 years and replaced in 15 years. The proportion of elevators in service in China that have been in use for more than 10 years is as high as 19.3%, and this part of the elevator is about to enter the end of life.
According to estimates, the demand for elevator upgrades will exceed 300,000 units in 2025, with replacements accounting for more than 20%.
3) China's elevator market is expected to exceed 300 billion yuan in 2025, with a CAGR of 11%. Currently, the total size of the elevator market in China is close to 200 billion yuan. We predict that domestic elevator sales are expected to exceed 1.5 million units in 2025, with an average annual increase of 9%; after maintenance, the market will maintain double-digit growth for the next five years, close to 100 billion dollars by 2025.
Kangli Elevator: Market share and profitability are expected to continue to increase
1) The company's domestic elevator market share is expected to increase to more than 5% in 2025. The company's product range has complete specifications, masters core control cabinet technology, manufactures 60% of core components independently, has obvious cost advantages, and has non-standard design capabilities, which can flexibly meet the various needs of users and lay the foundation for scale expansion. With advantages such as technology, cost, and operational flexibility, the company's market share in China is expected to increase to more than 5% in 2025.
2) The company's net interest rate is expected to rise to 15% in 2025. The domestic net interest rates of Tongli and TTM can reach 20%. As of 2020H1, the company's on-hand orders were 6.97 billion yuan, an increase of 10.5% over the end of 2019. The company's net interest rate in 2019 was only 7%. As the number of orders continued to increase, the scale effect became prominent. The net interest rate rose sharply to 12% in the first three quarters of 2020, and is expected to rise to 15% in 2025.
Profit forecasting and valuation
The company's net profit from 2020 to 2022 is expected to be 43,55,660 million yuan, an increase of 73%, 27%, and 20% over the previous year; PE is 18/15/12 times. The valuation of leading international elevator PE is more than 30 times. The company is an own-brand elevator leader with good growth. It has given 25 times PE in 2021, with a target market value of 13.8 billion yuan, and a “buy” rating.
Risk warning
Real estate infrastructure investment fell short of expectations; steel prices rose sharply; elevator safety incidents