“Equipment+Service” two-wheel drive, steady growth in performance. Sutest started with mechanical testing equipment. Since 2006, it has launched the “equipment manufacturing+testing service” two-wheel drive development model, expanding testing projects around the company's core customers, continuously investing in expanding production capacity, improving the service network, and enhancing the company's testing service capabilities. After more than 60 years of development, it has become a leading manufacturer in the field of environmental testing equipment and services. The controlling shareholder of the company is Suzhou Testing Instrument Factory, and the actual controller is Mr. Zhong Qionghua. The company launched employee stock ownership plans twice in 2019 and 2022. The long-term incentive system was improved to encourage employees to grow together with the company. The company's revenue and performance have maintained steady growth for 10 years. From 2013 to 2023, the CAGR of operating income was 25.16%, and the CAGR of net profit to mother was 23.97%. In 2023, the company achieved revenue of 21.17 billion yuan (+17.26%), and net profit to mother of 314 million yuan (+16.44%).
Environmental testing leader, supply and demand resonate. Environmental testing equipment: The company has the largest share of mechanical environmental testing equipment in the domestic market. It is in a leading position in the industry in climate and comprehensive environmental testing systems. It has pioneered many domestic equipment and participated in the formulation of many national industry standard catalogs. Various test equipment products sell well in more than 20 countries and regions including the US, Russia, and Europe. In addition to meeting equipment needs in downstream military and new energy fields, it will also support the construction of internal laboratories. Environmental testing service: The company is one of the largest listed companies in the testing industry with the largest revenue scale for environmental testing services. Currently, it has achieved a wide layout in various regions of the country, with full coverage of the industrial chain. From the supply side, the company has maintained steady capital expenditure and continued to expand production capacity. In the past two years, fund-raising projects in booming fields such as new energy and commercial aerospace have been completed one after another, driving the continuous growth in the production capacity of the environmental testing business; from the demand side, the company's forward-looking layout is booming, and demand in downstream military, new energy, commercial aerospace and other fields is expected to increase rapidly, and production capacity in superimposed fields will gradually be released, and testing services are expected to achieve impressive growth.
Sushiyite is entering new fields such as new energy vehicles, and production capacity expansion is in place one after another, which is expected to become a new driving force for growth.
After the Huawei ban, domestic replacement of integrated circuits accelerated testing demand, and third-party testing and analysis institutions for integrated circuits in mainland China accelerated their development. The company acquired Shanghai Yite in 2019 to enter the field of integrated circuit testing. Currently, Sushiyite is one of the third-party testing and analysis agencies with large revenue in mainland China. Sushiyit has now entered new fields such as new energy vehicles, and is expected to become a new driving force for the company's growth as investment equipment is put in place one after another.
We forecast the company's EPS for 2024-2026 to be 0.78, 0.97, and 1.21 yuan. Referring to the 24-year adjusted average of 23 times PE, corresponding to the target price of 17.94 yuan, we gave it a “buy” rating for the first time.
Risk warning
Capacity release progress falls short of expectations; downstream demand falls short of expectations; risk of falling military procurement prices; accounts receivable repayment falls short of expectations