Investment tips for this issue:
AHP score - After excluding the liquidity premium factor, Hongsheng Huayuan scored 2.14 points, which is in the 29.0% position of the total score.
Hongshenghua originated from a stock listing on December 5, 2023, and will be listed on the main board. After excluding the liquidity premium factor, we estimate that Hongsheng Huayuan's AHP score is 2.14, which is in the 29.0% score of the non-science and innovation system AHP model, which is above the midstream level. After considering the liquidity premium factor, we estimate that the AHP score of Hongsheng Huayuan is 2.04, which is in the 37.2% position of the total score of the AHP model for non-science and innovation systems, and is below the midstream level. Assuming a 90% finalist rate, under neutral expectations, the placement ratios for Hongsheng Huayuan's offline distribution targets in categories A and B are: 0.0165% and 0.0104%, respectively.
A leading enterprise in the domestic transmission line tower industry, with obvious scale advantages. The company is mainly engaged in R&D, production and sales of transmission line towers. It has achieved coverage of a full range of transmission line towers with full voltage grade products. It is far ahead of major competitors in the industry in terms of production capacity, output and revenue scale, and is the largest supplier of transmission line towers in China. The State Grid mainly procures transmission line towers through public tenders, and the company's winning bid scale and market share for the National Grid and China Southern Power Grid projects have remained at a high level. According to statistics, from 2020 to January to June 2023, the market shares of the company's bidding and procurement of transmission line towers at the China Grid headquarters were 19.40%, 24.59%, 21.85% and 25.00%, respectively, and the market shares of the China Southern Power Grid headquarters transmission line tower tenders were 13.22%, 10.04%, 15.25% and 20.79%, respectively. In addition, the company's products have been exported to Asia, Europe, America, Africa and other places, while providing transmission line towers and supporting services for large domestic and foreign general contracting companies by borrowing ships overseas.
The process technology industry is leading, filling gaps at home and abroad in some fields. The company's technical process level in transmission line tower processing technology and the application of new materials for transmission line towers is in a leading position in the industry. It has filled gaps at home and abroad in some fields (such as the application of large angle steel with a limb width of 280 mm or more, ductile iron conical bars, and hot-rolled weather-resistant angle steel); it has fully mastered UHV tower processing and manufacturing technology. Among them, the manufacturing technology of large angle steel components, Q420 and Q460 steel pipe towers and large spanning towers has reached the leading international level. At the same time, the company took the lead and participated in formulating a total of 24 standards, including 3 national standards, 7 industry standards, 7 group standards, and 7 enterprise standards.
The construction experience of key projects is rich, industry qualifications rank among the highest, and the continuous increase in power grid investment drives performance growth. Since the construction of China's first 1000kV Jindong-Nanyang-Jingmen UHV AC test demonstration project began in 2006, the company has participated in the construction of all domestic UHV projects and many key large-scale projects such as the world's No. 1 transmission tower, South America's No. 1 transmission tower, and the world's first 500 kV double circuit steel pipe pole project. The technical level has been proven in practice and recognized by the industry, and has the processing advantages of UHV transmission line towers. The continuous growth of power grid investment has provided broad development space for transmission line tower enterprises. UHV transmission line tower products have high technical barriers, and the number of domestic enterprises with supply qualifications is limited. Among the top 15 UHV AC engineering tower processing enterprises in the industry, the company's subsidiaries occupy 6 seats and have become the leading supplier of UHV transmission line towers in China. Strong market development ability, production capacity scale and technical level are a strong guarantee for the steady growth of the company's future performance.
In the first half of 2020-2023, the revenue scale was leading, but net profit and gross margin declined year by year, and the share of R&D expenditure was lower than the average of comparable companies. From 2020 to the first half of 2023, the company's revenue scale was ahead of comparable companies, and net profit declined year by year. Among them, 2022 and the first half of 2023 were lower than the average of comparable companies. From 2020 to 2022, the company's revenue compound growth rate was 19.84%, which was higher than the average of comparable companies. From 2021 to the first half of 2023, the company's gross profit margin and R&D expenditure did not account for as much as a comparable company average.
Risk warning: Hongsheng Huayuan needs to be wary of risks such as slowing growth in power grid construction investment, high customer concentration and major customer dependency, declining business performance, rising raw material prices, and relatively tight working capital.