Dema Technology is a leading enterprise in intelligent logistics equipment in China. Its products cover the entire industry chain from core components to systems.

The intelligent logistics equipment industry has a broad market space and a scattered competitive pattern; the company makes its own core components, and has outstanding advantages over domestic peers. The merger and acquisition of Moandi's complete electric roller products is expected to achieve synergy effects. At the same time, overseas layout is expected to become an important driving force. In the long run, it is expected to grow into China's “Interno”.

Leading domestic logistics equipment, products cover the entire industry chain from core components to the system. Dema Technology was founded in 2001. After establishment, the company used conveyor rollers as an entry point to extend its product line to downstream conveying equipment and sorting equipment. At present, it has formed an integrated layout of core components, key equipment, software development, and system integration, and is the leader in domestic logistics equipment. The company achieved revenue of 930 million yuan in the first three quarters of 2023, -4% year-on-year; achieved net profit of 73 million yuan, an increase of 4.9% over the previous year. Profitability improvements were mainly due to product structure optimization, and the share of revenue from core components with higher gross margins increased.

Intelligent logistics equipment has a broad space and a scattered competitive pattern. Intelligent logistics equipment is mainly divided into conveying systems, storage systems, sorting systems, information systems and other systems. The global logistics equipment market is close to 100 billion euros. The total size of China's intelligent logistics equipment market is expected to reach 106.76 billion yuan in 2024. New energy, express delivery, FMCG, and pharmaceuticals are the most important downstream. The global industry is fully competitive, the pattern is scattered, and the domestic landscape is also scattered, and manufacturers focus on different segments. Compared with well-known international logistics equipment suppliers, the advantage of domestic companies is that they are close to customers.

Rollers are one of the core components that determine the performance of intelligent logistics equipment, and are also one of the main bottlenecks limiting the development of domestic logistics equipment companies. Rollers and their drivers are the most basic units of logistics automation systems. Their performance and quality directly affect the performance and quality of logistics automation equipment and systems. The business areas of leading overseas companies cover the entire industry chain of core software and hardware, key equipment and system integration. However, most domestic companies are only engaged in equipment manufacturing or system integration, or only serve customers in a specific industry, so there is still a gap in technology integration capabilities, equipment stability, processing efficiency, processing capacity, and error rate. Rollers and their drivers account for about 15-20% of the value of equipment. The market space is about 3.272-4.363 billion yuan in 2023, and is expected to grow to 6258-8.344 billion yuan in 2027.

Dema Technology makes its own unpowered rollers to ensure the performance of the whole machine. The rollers produced by the company are used for self-produced transportation and sorting equipment, and can also be used in equipment or projects of other logistics equipment vendors or logistics system integrators, and were recognized as the “Single Champion Product” in 2022. Currently, the company produces 20 million units per year and is currently one of the largest roller manufacturing bases in the world.

The merger and acquisition of Moandi complements electric roller products, which is expected to achieve synergy effects. Moandi's main products are electric rollers. The acquisition of Moandi is expected to help Dema Technology improve the layout of rollers, consolidate the technical advantages obtained by Dema Technology in terms of core components, expand the application of Dema Technology products and services in the express logistics transportation and sorting market, and increase the overall sales scale. After the merger and acquisition, Dema Technology promised that Moandi's cumulative net profit for 2023-2025 will not be less than 49 million yuan, 103 million yuan, and 165 million yuan, respectively (corresponding net profit for 2023-2025 was 49 million yuan, 54 million yuan, and 62 million yuan, respectively).

It is rapidly entering the global market and is expected to grow into China's “Interno” in the long term. We believe that Interno's core competitive advantages include: (1) In terms of products, Interno is positioned as a manufacturer and supplier of key equipment in the logistics industry, rather than a system integrator. (2) On the market side, Interno attaches importance to the global market and actively develops it. (3) In terms of management, always pay attention to and improve human efficiency. Dema Technology can compete with Interno in terms of product positioning and market positioning. The company adheres to the business structure of core components+key equipment+system integration solutions, enhances product stability and reliability, while developing globally, establishing overseas production bases and sales and service centers, and carrying out localized operations. It is expected to grow into China's “Interno” in the long run.

Give it a “Highly Recommended” investment rating. We expect that in 2023-2025, Dema Technology's revenue will be 1,619, 20.07, and 2,225 million yuan, up 6%, 24%, and 11% year on year; net profit to mother will be 1.07, 1.8, and 216 million yuan, up 31%, 68%, and 20% year on year, corresponding PE of 18, 11, and 9x. Dema Technology can target global leader Interno and acquire Moandi to complete the business line; the company actively lays out globally, has significant technical and cost advantages, and there is still plenty of room in overseas markets. It is expected to become an important driving force for future growth. It is covered for the first time, and gives it a “highly recommended” rating.

Risk warning: the risk of macroeconomic and industry fluctuations, the risk of fluctuations in raw material prices, and the risk of increased market competition.