China Building Materials testing leader, multi-layout-driven scale expansion. The company is the leader in the testing of building materials under China National Building Material General Hospital, and has continued to promote "cross-disciplinary and cross-regional" expansion since it was listed in 2016. at present, its business covers 22 provinces across the country. involving building materials, environment, intelligent manufacturing, food and other fields, revenue grew at a compound rate of 27% from 2016 to 2021, and the scale expanded rapidly. The gross profit margin and ROE of the company are better than those of the same industry, and the cash flow performance is excellent, and the overall profit quality is higher.

Testing the long slope of the track with thick snow, the head effect appears gradually. Demand side: the scale of the inspection and testing market is more than 400 billion, and the downstream involves various macroeconomic industries, among which building materials is the largest testing market, with a scale of more than 100 billion. The overall prosperity of the testing industry is affected by the macro environment, and the introduction of demand-side policies in the second half of the year is expected to lead to the marginal improvement of industry demand. Supply side: at present, the CR5 of the testing industry is about 3%, and the pattern is extremely scattered. Head organizations rely on newly established, mergers and acquisitions to accelerate scale expansion. In recent years, the degree of concentration has steadily increased, and the industry head effect is beginning to show. The follow-up is expected to gradually give birth to local comprehensive testing leaders. From the perspective of profit model, excluding high resource barriers such as military industry, the steady-state gross profit center of the testing business is about 50%, and the net profit is about 15% and 20%.

The layout of testing continues to be diversified, and the growth momentum of new business is strong. The company locates the comprehensive inspection and certification group, which has initially formed five business platforms: inspection and testing, certification evaluation, intelligent manufacturing, metrology and calibration, and technical services, of which inspection and testing is the core business, accounting for 72% of revenue in 2022:

1) Building materials testing is the core advantage plate. Since 2022, the business structure has been significantly optimized, and the proportion of new houses has continued to decline. In the follow-up, the penetration rate of beneficiary stock housing identification has increased, the infrastructure sector has been developed, and the business is expected to maintain steady growth. 2) the popularization of the three soils benefiting from environmental testing is accelerated, and the business increment is expected. 3) the layout of other testing areas such as food farmers has been accelerated, the extension mergers and acquisitions have been continuously promoted, and the product lines have been gradually diversified. In the emerging business: 1) driven by the dual-carbon and intelligent manufacturing policy, the demand of cement intelligent laboratory business is released rapidly, the cost of superimposed EPC project is reduced, and the driving force of owners' capital expenditure is enhanced, and the business is expected to achieve rapid growth this year. 2) the technology reserve in the field of double carbon continues to be rich, and the business has obvious advantages of first-mover, which can provide the whole process management service of carbon emissions. When the mandatory carbon emission reduction policy is landed and the carbon trading market is further opened, carbon consulting and carbon verification business is expected to increase volume quickly.

The testing giant gene highlights, and the stock price is expected to welcome Davis to double-click. From the review of overseas testing leaders, the PEG of integrated testing institutions in the growth stage is about 1.5 times, and the mature PE is about 20-30 times, which is significantly higher than that of single-field testing companies. From the perspective of stock price inflection point, comprehensive testing institutions in the early stage of layout development, affected by depreciation growth and M & A running-in, profit margins usually have a pressure drop, valuation expansion power is weak, and the upward inflection point is usually on the eve of profit release. The company's internal management system is perfect, M & An investment strategy is excellent, and the growth point of the main business is clear, and the gene of the comprehensive test giant is prominent. with the release of economies of scale and M & A synergy, profit margins are expected to usher in an upward inflection point, valuation and EPS go up synchronously, and the stock price is expected to meet Davis' double-click.

Investment suggestion: we predict that the company's homing net profit from 2023 to 2025 will be RMB 3.1 / 500 million, an increase of 22%, 25% and 31% respectively over the same period last year, corresponding to an EPS of 0.38, 0.48 and 0.63 respectively.

The current share price is trading at 27-22-17 times the corresponding PE, covering a "buy" rating for the first time.

Risk tips: business layout development is not as expected, M & A target performance is not as expected, and so on.