Company profile:
Guangri Co., Ltd. is one of the companies with the longest history of elevator manufacturing in China. The company takes the elevator business as the core and extends the upstream and downstream industrial chain. Revenue stabilized in 2023, achieving revenue of 7.384 billion yuan, an increase of 5% over the previous year; in 2023, net profit to mother was 762 million yuan, an increase of 49% over the previous year.
Guangri Co., Ltd. has joint ventures in four core brands: Hitachi Elevator, Yongda Elevator, state-owned Guangri Elevator, and Yida Express Elevator. The company has not only shared the growth of the high-end elevator market, but also improved its own operating capabilities, and has its own position in the middle and low end markets. Installation, renewal and maintenance are expected to drive the development of the elevator industry. According to estimates, the installation of elevators in old neighborhoods is expected to bring a market size of close to 4.5 to 5 billion dollars to the elevator market every year. The demand for old renovation in Guangzhou is high, and the company is expected to receive a stable order volume as a local state-owned enterprise in Guangzhou. Updating the elevator stock will also bring more space. According to our estimates, the elevator renewal market will reach 28.330 billion yuan in 2024 and 40.745 billion yuan in 2026, with a compound growth rate of 20% from 2024 to 2026. Furthermore, according to estimates, China's elevator rear market size (including maintenance, overhaul, and transformation) is expected to reach 1115.4/1192.8/135.21 billion yuan from 2024 to 2026, respectively, with a broad market space.
The company owns 30% of Hitachi Elevator (China) Co., Ltd. and is deeply tied to Hitachi Elevator. The company initially depended heavily on Hitachi Elevators for elevator parts and logistics services, and has since then actively expanded new customers.
The share of related transactions between the company and Hitachi China and its subsidiaries in the company's revenue has been declining in recent years. The investment income brought to the company by Hitachi China accounts for a high proportion of the company's net profit to mother, and the company enjoyed Hitachi China's high-quality development results. Hitachi China has a sufficient number of elevators, and the performance is expected to remain stable.
In 2023, with the downstream boom of the company's complete elevator machines declining and the overall decline in orders in the elevator industry, the total number of orders and shipments in the elevator sector achieved contrarian growth. Through outreach and mergers and acquisitions, the company is expanding its market size and market share in the elevator industry. In addition, the company is also expanding its industrial chain and intelligent equipment construction capabilities, while strengthening industrial empowerment through investment.
In December 2023, the company released an equity incentive plan (draft). The performance assessment goals are comprehensive, fully reflecting the company's confidence and determination for future development, as well as the principle of combining incentives and restraints. The company adheres to the dividend strategy to give back to shareholders. The shareholder return plan was promulgated, and the company's dividend rate is expected to continue to increase.
Profit forecasts and investment suggestions:
We expect the company's net profit to be paid in 2024-2026 to reach 845 million yuan, 958 million yuan, and 1,040 million yuan respectively, up 11%, 13%, and 8% year-on-year, corresponding to 13, 11, and 11 times the valuation.
Comparable, the company's 24-year PE valuation was 15X, giving the company a 15X valuation, corresponding to a stock price of 14.70 yuan. First coverage, giving the company a “buy” rating.
Risk warning: downstream demand falls short of expectations; market competition intensifies; the operating conditions of participating companies fall short of expectations; project progress falls short of expectations; risk of changes in equity incentive plans.