Leading in pneumatic conveying systems, booming downstream, expanding categories and opening up space for long-term growth, the company is a leading domestic pneumatic conveying equipment system, a national-level specialist, and a new “little giant”. The company's products use synthetic resins as the main application field, and the downstream gradually extends from petrochemical to silicone, modified plastics, pharmaceuticals, food and other industries. In the short to medium term, high downstream capital expenditure helps the company's performance continue to grow; in the medium to long term, expanding categories and going overseas opens up room for growth. We forecast the company's revenue for 2023-2025 to be 1,290 million yuan, 15.74/2,050 billion yuan, net profit to mother of 2,97/3.64 billion yuan, and EPS 4.46/5.46/7.26 yuan; the current stock price corresponds to 15.7/12.8/9.6 times PE. First coverage, giving a “buy” rating.
Downstream synthetic resin production is actively expanding, and the company's market share is expected to continue to increase. Significant incremental ethylene will enter a new round of expansion cycle in the future, driving the expansion of production of major downstream synthetic resins, and there is strong demand for pneumatic conveying systems as core equipment. According to the forecast of the China Petroleum and Chemical Industry Federation, the total market space for pneumatic conveying equipment in the synthetic resin sector in 2023-2027 is about 20 billion yuan, with an average annual scale of 4 billion yuan. We estimate the market size of about 2.2 billion yuan in 2022, so we can see that the average annual market size for 2023-2027 will increase by 81.8% compared to 2022, and the growth rate will remain at a high level. The company currently has the largest market share in the country, and is expected to continue to increase, providing a considerable increase in performance.
There is plenty of room to expand categories, go overseas, and upgrade equipment. The company is expected to replicate the growth path of international giants. Synthetic resins have special physico-chemical properties, and transportation technology is difficult and stability requirements are high; as a synthetic resin pneumatic transportation leader, it is relatively easy to enter the pharmaceutical, food and other industries. Referring to the development paths of international giants such as Coperion and Zeplin, they all started in a certain segment, and continued to expand categories and develop globally through mergers and acquisitions. The company is expected to replicate and open up the growth ceiling. The company has received orders from leading customers in the non-resin industry such as Arowana, Hesheng Silicon, Bayer, etc., and the market is developing smoothly. The company acquired 100% of Italy's shares in 2020 to boost overseas expansion. The company's overseas revenue increased from 3.88 million euros to 7.95 million euros in 2020-2022, and is expected to continue to increase in the future. The policy supports equipment updates, while demand in the chemical industry continues to improve, driving a recovery in equipment investment demand, and the company will continue to benefit.
Risk warning: Downstream capital expenditure has declined, industry competition has increased risks, and progress in category expansion falls short of expectations.