Zhen'an Science and Technology, as a leading enterprise of building shock reduction and isolation, is expected to fully benefit from the industry expansion brought about by the landing of legislation; the company accelerates the expansion of the market outside Yunnan Province, and the scale of production capacity continues to expand, which will further open the space for performance growth. Cover for the first time and give a buy rating.

Support the main points of rating

The importance of earthquake resistance and disaster reduction has increased, and legislation has been established to promote demand expansion: 79% of China's land area is located in areas with basic earthquake intensity of 6 degrees and above, which is an earthquake-prone country, and earthquake casualties are more serious than those in other countries. As the work of disaster prevention and reduction changes from "post-disaster relief" to "pre-disaster prevention", the demand for seismic isolation technology is gradually increasing, and the implementation of the regulations on Seismic Management of Construction Engineering indicates that the policy attitude has changed from "encouraging and advocating" the application of seismic isolation technology to "enforcement", and the demand space for building seismic isolation has been further expanded.

The leading enterprises of building shock reduction and isolation have fully benefited from the expansion of the industry: the company started its business in Yunnan Province, one of the provinces with the most frequent earthquakes in China, and has ploughed the building shock reduction and isolation industry for 12 years. It has strong technical research and development capabilities and rich project practical experience. The company editor-in-chief or participated in the formulation of a number of local, industry and national standards, more sensitive to market changes. The company breaks through the limitations of simple product production enterprises, can provide customers with perfect supporting services of the whole industry chain, and the competition barrier continues to thicken. With strong technology, service capacity and brand advantages, the company is expected to fully benefit from the expansion of the industry as a leading enterprise of building shock reduction and isolation.

Continue to expand the external market of Yunnan Province, capacity expansion opens room for growth: the company accelerates the expansion of the external market of Yunnan Province, and has initially completed the national market layout of three major production bases and four major sales areas. it can cover the key cities with the potential of building shock isolation application. Since the listing of the company, the company has continued to expand its production capacity, raising funds and expanding capacity through IPO, convertible bonds, acquisitions, simple procedures and other ways, so that the production capacity of shock isolation products is expected to increase to 129000 sets, and the production capacity of shock absorption products is expected to increase to 155000 sets, which is significantly higher than that before listing, further opening up the growth space of the company.

Valuation

Considering the expansion of building isolation demand after the landing of legislation, the company as an industry leader is expected to fully benefit, and the continued expansion of production capacity will bring performance growth. We estimate that the company's income in 2022-2024 will be 8.90,15.60,2.705 billion yuan respectively, the return net profit will be 1.06,2.23,410 million yuan respectively, and the EPS will be 0.43,0.90,1.66 yuan respectively. Cover for the first time and give a buy rating.

Main risks faced by rating

The price of raw materials rose faster than expected, the landing effect of the policy was not as expected, and the progress of the company's capacity expansion was not as expected.