Key points of investment
It was selected in the “2022 Hurun China Top 100 Sustainable Private Enterprises List”. It is the only agency in the TIC industry that is on the TIC industry's list. According to information on the official website of HuaTest on March 30, Hurun Research Institute released the “2022 Hurun China Top 100 Sustainable Private Enterprises List” on March 16. The company was honored for its outstanding performance in the field of sustainable development, becoming the only third-party testing and certification agency in China on the list. The company is a pioneer in the path of ESG Chineseization. It was the first to join the China ESG Leaders Organization in 2020 to improve its ESG level and ESG service capabilities. It has published the “ESG Report” for two consecutive years. We believe that the company's ESG and dual carbon business leads the industry, with a good foundation and outstanding competitive advantage. In the future, as various regions and all walks of life actively research and formulate dual carbon action plans, it is expected that they will fully benefit from the release of industry demand and contribute to increased performance.
The Sanpu Soil Testing Technology Training Course has been successfully co-organized in various provinces and cities across the country, and has participated in the Sanpu pilot project in various provinces and cities across the country. From March 23 to 24, the first soil testing technology training course for the 3rd National Soil Survey in '23, organized by the Cultivated Land Quality Monitoring and Protection Center of the Ministry of Agriculture and Rural Affairs and co-organized by China Test Inspection was successfully held in Shenzhen. As a co-organizer, the company shared methods for strengthening the inspection quality control of soil survey samples, and provided support such as assessment sites, equipment, consumables, and technicians, which were highly recognized by the training course teachers and experts. The third national soil survey will be fully rolled out in 23-24. According to the estimates of the in-depth inspection report of Zheshang Machinery, the market space for the testing process is estimated to be about 7 billion yuan. The company's 25 laboratories have been shortlisted, and 15 laboratories have been awarded the Quality Standardization Laboratory for Cultivated Land by the Ministry of Agriculture and Rural Affairs. As of March this year, they have participated in pilot work in Beijing, Liaoning, Jiangsu, Shandong, Guizhou, Yunnan, Hunan, Chongqing and other provinces and cities across the country. The company has strong brand credibility, a soil survey service network spread all over the country, and has obvious advantages in the bidding process.
The advantages of leading leaders in traditional fields are highlighted. The five major business segments of strategic circuit companies, such as pharmaceuticals and medicine, new energy, and semiconductors, have been added. Life science testing, industrial product testing, trade assurance, consumer goods testing, and pharmaceutical medical services accounted for 48%, 19%, 13%, 11%, and 9% of revenue in 2021, respectively. Among them, the pharmaceutical sector grew the fastest. The company's “horse-racing” in traditional fields such as the environment, food, and trade has ended. It has entered a period of intensive cultivation, increasing investment in new tracks such as medicine, new energy, and semiconductors to cultivate medium- to long-term growth points.
Refined management has consolidated the foundation for development, operational efficiency continues to improve. In line with the growth potential of overseas leaders, fine management has been effective, and profitability and per capita output have increased dramatically. The company's net interest rate increased from 6.5% in 2017 to 17.6% in 2021; the company strengthened investment control on fixed assets, and the capital expenditure ratio returned to a reasonable range, falling from 31% in 2017 to 13% in 2021; the growth rate of personnel was less than the growth rate of income, and the per capita output value increased to 390,000 yuan, compared with overseas leaders.
Profit forecasting and valuation
Revenue for 2022-2024 is expected to be 51/66.5 billion yuan, an increase of 19%/20%/21% over the previous year; Guimu's net profit is 9.0/10.9/1.39 billion, an increase of 21%/20%/27% over the previous year. The compound growth rate of Gumo's net profit in 2022-2024 was 24%, corresponding to PE 38/32/25 times, maintaining the “buy” rating.
Risk warning: Management capacity challenges brought about by increased vicious competition and scale expansion in downstream segments