Key points of investment
This Friday (December 08), “Hongsheng Huayuan”, a company listed on the Main Board, asked for quotations.
Hongsheng Huayuan (601096): The company is mainly engaged in R&D, production and sales of transmission line towers; the company achieved operating income of 6.107 billion yuan/7.162 billion yuan/8.771 billion yuan in 2020-2022, YOY in that order was -23.69%/17.29%/22.46%, and the compound annual growth rate of 3.10% in three-year operating income; achieving net profit of 522 million yuan/207 million yuan/166 million yuan, YOY in that order was 102.09% /- 60.35% /- 19.89. In the latest reporting period, the company's revenue from January to September 2023 was 6.580 billion yuan, an increase of 1.58% over the same period last year; net profit was 89 million yuan, a year-on-year decrease of 31.15%. The company expects to achieve operating income of about 9.05 billion yuan to 9.150 billion yuan for the full year of 2023, a change of 3.18% to 4.32% over the same period last year; the expected net profit attributable to shareholders of the parent company is about 123 million yuan to 133 million yuan, a change of -25.81% to -19.78% over the same period last year.
Investment highlights: 1. The company is a leader in the field of transmission line towers. It has participated in the construction of all domestic UHV projects and has experience in undertaking major projects. The company has 10 production bases and is the largest supplier of transmission line towers in China, with production capacity far ahead of major competitors in the industry. Since the construction of China's first UHV project in 2006, the company has participated in the construction of all UHV projects in China. It has established a good reputation and brand advantage in the industry through many key large-scale projects, including the world's tallest tower, the number one transmission tower in South America, and the vast majority of transmission line towers with a height of 300 meters or more, including the world's first 500 kV double circuit steel pipe pole project. Currently, the downstream customers of China's transmission line tower manufacturers are mainly the State Grid and the South Grid. From January to June 2023, the company occupied nearly 1/4 and 1/5 of the market share in the bidding and procurement of transmission line towers at the headquarters of the State Grid and the South Grid, respectively, leading the industry. 2. The controlling shareholder of the company is Shandong Electric, a subsidiary of China Electric Equipment, which empowers the company's transmission line tower technology advantages; in the future, the company plans to use Chinese electrical equipment to expand into the overseas power engineering market of transmission line towers. The controlling shareholder of the company is Shandong Electric, a subsidiary of China Electric Equipment, which is a major domestic power transmission and transformation industry group. It has pioneered the key technology of UHV products, has a transformer production base and integrated production lines for electrical appliances, cables, etc., and since 2020, it has successively reorganized business entities involved in transmission line towers within the system into the company. The company has now fully mastered the processing and manufacturing technology of UHV towers and achieved product coverage for a full range of transmission line towers. Among them, the manufacturing technology of large angle steel components, Q420 and Q460 steel pipe towers, and large span towers has reached the leading international level. According to the company's prospectus, in the future, on the basis of stabilizing the basic market of transmission line tower business, the company will make full use of the market resource support of China's electrical equipment to expand into overseas power engineering markets.
Comparison of listed companies in the same industry: According to the similarity of main products and revenue structures, Huijintong, Fengfan Co., Ltd., Oriental Tower, and comparable listed companies for Hongsheng Huayuan were selected. Judging from the comparable companies mentioned above, the comparable PS-TTM (arithmetic average) is 1.71X, but considering the differences in product structure, we tend to think that the comparability of the comparable PS-TTM is limited; the average revenue scale of the comparable company is 3,321 billion yuan, and the gross margin is 18.94%; in comparison, the company's revenue scale is higher than the average of comparable companies, and the gross margin level is less than the average of comparable companies.
Risk warning: There is still a possibility that companies that have begun the inquiry process will not be able to go public due to special reasons; company content is mainly based on prospectus and other public information; there is a risk that the selection of listed companies in the same industry is inaccurate; there may be interpretation bias in content data selection, etc. The specific risks of listed companies are shown in the text.