A strong player in the field of motion control, with a comprehensive layout of industrial control products. The company has been deeply involved in the motion control industry for more than 20 years. Currently, it has product lines such as control systems, stepping systems, and servo systems. It is one of the few enterprises in the industry with a complete motion control product line. Stepper systems contribute to the company's main revenue, and the share of servo revenue is increasing year by year. Furthermore, the company actively meets the development needs of strategic emerging industries and adapts to industry trends.
The motion control market space exceeds 10 billion dollars, and strategic emerging downstream & product diversification advantages help the company develop 1) Intelligent manufacturing+domestic production instead of two-wheel drive, opening up room for growth and imagination. In 2019, the market size of motion control systems in China was 42.5 billion yuan. Combined with data from the China Business Industry Research Institute, we estimate that this scale will reach 51.9 billion yuan in 2023. Currently, Chinese and foreign investors account for a large share of the domestic market. In recent years, domestic brands, including companies, have continuously increased their investment, showing a clear competitive advantage in some product segments and markets.
2) The marketing model is transformed and upgraded, and new and old industries are being cultivated simultaneously. The company's marketing strategy changed from “direct sales as the main, distribution as a supplement” to “channel-oriented, complementary and win-win”, developing strategic emerging industries on the basis of digging deeper into industries with traditional advantages. At present, companies in emerging industries such as new energy have basically covered the top customers in the industry, and are showing a trend of continuous increase in volume.
3) All categories of products+complete solutions drive performance growth, and cost performance+quick response create a differentiated competitive advantage. The company provides an overall solution of “PLC system+module+servo+stepper”, which can effectively improve the supporting rate of its own products and drive product sales growth. In addition, there are various requirements for customized motion control products, and the company competes with foreign investors by differentiating itself with cost performance and quick response.
Stepping up and progressing in business, servo & controller pioneering a new situation
1) Stepping system: A single champion product in the Shenzhen manufacturing industry, ranking first in terms of market share in the country. The company's stepper system has steadily ranked first in the national market share for more than 10 years. It is the first domestic manufacturer to achieve closed-loop stepper drive technology & launch stepper high-speed bus EtherCAT and RTEX products. The comprehensive technical performance indicators of the products rank among the highest in the country, and many core technologies have reached the leading international level.
2) Servo system: Product performance benchmarks leading brands at home and abroad, and market share is increasing year by year. Although the market share of the company's servo system is small (only 1.7% in 2022), as domestic substitution in the servo industry accelerates and downstream emerging industries develop well, the company is expected to create long-term value in the servo business through factors such as actively deploying emerging industries & increasing the share of high-end products, bringing high revenue, and reducing procurement costs from self-produced motors and encoders.
3) Controller: PC-based has significant advantages, and large, medium, and medium PLCs empower medium- to long-term development. ① PC-based control card: The company's market is second, product performance is at the top of the domestic market, and is expected to benefit from the accelerated PC-based penetration trend; ② PLC: The company's large, medium, and small PLCs have achieved market breakthroughs. In 2022, the company expects the product to catch up with the Japanese best level in 2-3 years, and is expected to break customer barriers in the medium and large PLC markets in the future.
Profit forecast and valuation: The company's total revenue for 2023-2025 is expected to be 15.5/18.7/221 billion yuan, an increase of 16%/20%/18%, respectively; net profit from the mother is 1.4/222/280 million yuan, an increase of -36%/56%/29%, respectively. Considering that the company has significant advantages in stepping systems & PC-based control cards, accelerated replacement of servo products is expected to drive high performance, and smooth promotion of large, medium, and large PLC is expected to open up room for growth. We gave the company a 23-year PE valuation 65 times, corresponding to the target price of 29.50 yuan, and gave it a “buy” rating.
Risk warning: Risk that the recovery of the automation industry falls short of expectations; R&D risk; control risk brought about by scale growth; risk of importing IC electronic components abroad; risk of external processing; measurement of subjective risks.