Key points of investment
A leading company in screw compression technology, the vacuum business continues to expand. The company is one of the most applied screw compressor manufacturers in the world. It has used screw compression technology in various processes such as air, vacuum, refrigerants, and special gases. The company's products are mainly divided into two categories: vacuum pumps and compressors. In 2022, the company's vacuum products/compressors accounted for 39%/53% of revenue. The company's traditional compressor business has maintained steady growth, and the share of vacuum pump revenue continues to increase. At present, the company's dry vacuum pumps have occupied a high market share in the photovoltaic silicon wafer crystal industry, and are gradually expanding in the photovoltaic cell industry and semiconductor industry, and future performance is expected to remain high.
The vacuum business became the first driving force for the company's performance. The vacuum business revenue of large market space companies increased from 231 million yuan to 1,276 billion yuan in 2017-2022, GAGR = 40.8%. As of 2023H1's vacuum segment revenue reached 746 million yuan, a year-on-year increase of 45.0%. 1) Photovoltaics: The company's vacuum products have been widely used in photovoltaic crystals and cells, benefiting from strong demand in the industry and iteration of cell technology. We estimate that in 2024, the vacuum pump market space for silicon wafers and cells is expected to reach 1.64 billion yuan. 2) Semiconductors: The semiconductor vacuum pump stock market is huge, domestic production expansion is accelerated, and the company has ushered in development opportunities. At present, the company's vacuum products have been shipped in small batches at some domestic machine vendors and fabs. Downstream customers include UMC, LSMC, Huahong, Xinen, and Hejian.
The traditional compressor business has been introduced, and product strength and energy efficiency continue to be enhanced. The company's traditional compressor segment can be divided into two categories: refrigeration compressors and air compressors. The downstream refrigeration compressors are mainly in the commercial central air conditioning, refrigeration, and heat pump industries, and air compressors are widely used in manufacturing production. Under the “dual carbon” trend, the energy efficiency of compressors is becoming more prominent. The company is actively launching energy-saving products such as inverter compressors, and expanding product categories to continuously capture the differentiated needs of various downstream industries. At the same time, the company launched oil-free air compressors, which are expected to be used in industries that require high air cleanliness, such as medicine, food, and electronics. The company's traditional compressor segment performance is expected to maintain steady growth in the future.
Investment advice
The company is a leading domestic screw compression technology company, and its performance is expected to grow steadily. We expect the company's net profit to be 7.8/10.0/1.24 billion yuan respectively in 2023-2025, EPS 1.47/1.87/2.32, and corresponding PE 13.9/10.9/8.8, respectively. The company's valuation is lower than that of comparable companies, and the PE valuation is 18 times that of 2023, with a target price of 26.5 yuan. For the first time, coverage was given a “buy” rating.
Risk warning
The macroeconomic climate fell short of expectations; industry competition intensified; domestic substitution fell short of expectations; and the expansion of production in the photovoltaic industry fell short of expectations.