Leading independent elevator brand in China; semi-annual report performance increased 83%, optimistic about the company's high-quality and steady development 1) In the first half of 2023: the company achieved revenue of 2.28 billion yuan, down 2% year on year; net profit of 230 million yuan, up 83% year on year; net profit after deducting 190 million yuan, up 82% year on year. 2) Raw material steel prices fell +the share of straight levers increased, and gross margin improved dramatically: in the first half of the year, the company achieved a gross profit margin of 29%, +5.7 pct year on year; achieved a net interest rate of 10%, +4.7 pct year on year. The company's sales, management, R&D, and financial expenses reached 10%, 4%, and 0% respectively, with a year-on-year increase of +0.7 pct, +0.2 pct, +0.1 pct, and +0.1 pct, respectively. 3) Beautiful cash flow: The net cash flow generated by the company's operating activities in the first half of the year was about 360 million yuan, a significant increase from -09 million yuan in the same period last year. 4) Ongoing orders increased 13% year over year, and international layout accelerated: As of June 30, 2023, the company's active orders were 8.08 billion yuan, an increase of 13% over the previous year. The company seized the “Belt and Road” development opportunity. Overseas business achieved revenue of 160 million yuan in the first half of the year, an increase of 32% over the previous year. 5) The share of installation and maintenance gradually increased: in the first half of the year, the company's elevators, escalators, parts, installation and maintenance business accounted for 67%, 9%, 4%, and 17%, respectively, +22 pct, -24 pct, -1 pct, and +3 pct, respectively.
China's elevator market is expected to reach 266.5 billion yuan in 2025, CAGR = 7% in three years, and market potential after maintenance 1) The total size of the domestic elevator market will reach 25.3 billion yuan in 2022, 266.5 billion yuan in 2025, and 7% CAGR in 2022-2025. The elevator aftermarket has huge potential. It is expected to maintain double-digit growth until 2025. After 2025, the market is expected to account for more than 30% of the total size of the industry, and this ratio will further increase in the medium to long term.
2) Currently, world-class brands such as Otis, Schindler, KONE, Thyssen, Hitachi, and Mitsubishi account for about 70% of the domestic market. According to the main business revenue estimates of each company, Shanghai Electromechanical, Kangli Elevator, Guangri Co., Ltd., Merun Elevator, and Yuanda Intelligence had a market share of 10.8%, 2.3%, 3.3%, 0.5%, 0.4%, and 0.7% respectively in the domestic market in 2022, and there is plenty of room for improvement. As the maintenance market penetration of domestic manufacturers increases, the layout of digital intelligent elevators increases, and the internationalization process accelerates, the market share of domestic elevator manufacturers is expected to increase further.
China's independent brand elevator market share has both increased market share+post-market share, and profitability is expected to increase 1) Core components and integrated independent research and development of complete machines to maintain cost competitiveness. The company has built a manufacturing capacity that ranks among the highest in the industry in terms of industrial scale, intelligent manufacturing, and digital informatization management, and relies on the advantages of complete component production to quickly respond to customer needs; with the advantages and service capabilities of integrated manufacturing capabilities and service capabilities from core components to complete machines, it provides customers with solutions throughout the life cycle and maintains cost competitiveness.
2) Increase the layout of high-quality strategic customers, and continue to increase brand recognition. The company actively enhances strategic customer coverage, cultivates and develops core agents, explores high-quality customer groups, and continuously consolidates and deepens strategic partnerships with high-quality domestic real estate companies with high-quality, differentiated products and high-quality after-sales service.
3) Follow the “Belt and Road” policy and move on to the international stage. In terms of the international market, the company's products have been exported to more than 100 countries and regions around the world, focusing on increasing overseas market development efforts, including in regions along the Belt and Road and the Middle East, and strengthening cooperative relationships with high-quality overseas agents.
Profit forecasting and valuation
The company's net profit for 2023-2025 is estimated to be 3.8, 450, and 50 million yuan, an increase of 40%, 18%, and 11% over the previous year; the corresponding PE is 18/15/13 times. Maintain a “buy” rating.
Risk warning: real estate policy risk, product safety accident risk, industry calculation bias risk, etc.