Leading domestic thermal power DCS leader, leading the innovation of industrial automation and information technology, Keyuan Intelligence focuses on R&D, production and sales of industrial automation and information technology products. The main products include distributed control systems (DCS), programmable logic controllers (PLCs), intelligent actuators, real-time database SyncBase, etc. The company's performance got off to a good start in 24 years. We are optimistic about the performance in the next few years. In 2024Q1, it achieved revenue of 367 million yuan, +30.08% year over year, and net profit to mother reached 43 million yuan, +322.18% over the same period. We think the next few years will be a big year of thermal power renewal, and the company's performance may be fully guaranteed. With the introduction of the “Development of New Quality Productivity” policy, the company is committed to research and development of industrial automation and information technology and products.
The industrial automation market is expanding, and the localization rate is gradually increasing
1) Industrial automation construction meets the requirements for the development of new quality productivity. As the core of the national strategy, the industrial automation industry has become the focus of support from many government departments, and a number of policies and guidelines have been introduced to accelerate the growth of the industry. 2) The field of industrial software and automation continues to expand, and industrial automation shows a trend towards localization. In 2022, the market share of domestic industrial automation brands in China was 43.7%. According to the “2024-2029 China Industrial Automation Industry In-depth Survey and Investment and Financing Strategy Research Report”, it is expected that by 2024, the market share of local brands will increase to 47.7%. 3) Thermal power DCS has broad development space, and the localization rate is expected to increase further. According to data from Zhiyan Consulting, in 2022, the total market size of the global distributed control system market is 18.8 billion US dollars. The total market size is expected to reach 19.9 billion US dollars in 2023, and the development trend is good. From 2016 to 2021, China's DCS localization rate increased from 46.2% to 55.7%, and the localization rate is expected to increase year by year.
Keeping up with the trend of new productivity, thermal power equipment updates are reaching a climax, and AI has become a new driving force for growth 1) In view of global energy transformation trends and domestic policy support, the thermal power industry is facing a climax of modernization. In this context, Keyuan Intelligence may continue to expand its technical solutions in the field of smart grids and energy management to meet market demand, thereby driving the company's long-term growth and further strengthening its position in the industry. Focus on scientific research, with eight scientific research institutions to protect, and school-enterprise, enterprise-enterprise cooperation to industrialize high-end technology.
2) Keyuan is also actively deploying relevant vertical fields familiar with AI empowerment. It already has many mature solutions and application cases through AI, machine vision and other technologies. In particular, it has launched core technologies such as AI-based online identification of operating conditions, self-optimization of control strategies, autonomous optimization of multiple conditions, equipment defect identification, equipment operating state prediction, equipment operating state prediction, and equipment health knowledge management.
3) Industrial Internet drives cost optimization and efficiency improvement of cooperative enterprises. The company launched the EMPOWORX industrial Internet platform, which provides integrated intelligent solutions for the process manufacturing industry and digitizes the entire chain from product design, manufacturing to application services.
Investment advice: We forecast the company's 24-26 revenue of 19.21/25.35/3.258 billion yuan, 24-26 net profit of 2.59, 3.39, and 422 million yuan, EPS of 1.08, 1.41, and 1.88 yuan, corresponding to the closing price of 18.79 yuan/share on May 13, 2024. PE is 17.42/13.34/10.00 times, respectively. We are optimistic about the company's downstream demand for thermal power and new AI momentum for the next 3 years. The first coverage gives it a “buy” rating.
Risk warning: 1) Policy implementation falls short of expectations; 2) Technological development falls short of expectations; 3) Macro demand falls short of expectations; 4) The company has received letters of concern and inquiry in history.