Case BL: E_Kongsu M Disclosure Ary2] 024 semi-annual results forecast.
Key points of investment
Net profit to mother is expected to increase by 30%-70%, net profit from non-return to mother is expected to increase 22%-61%, and the company disclosed the 2024 semi-annual performance forecast: net profit to the mother is expected to achieve 0.437-0.572 billion yuan in the first half of 2024, an increase of 30%-70% year-on-year. Among them, the single Q2 company achieved net profit of 0.24-0.375 billion yuan, an increase of 1%-58% over the previous year (according to the announcement, net profit to mother in the first half of the year, 0.307- 0.375 billion yuan, a year-on-year increase of 29%-58%). Benefiting from the high downstream boom in LNG, offshore shipbuilding, etc., the company's order volume has risen sharply, and its performance has grown rapidly. Looking at the whole year, the downstream boom has not abated, and the company's expansion logic is smooth. We believe that the company has plenty of orders in hand. With the optimization of the business structure and the release of scale effects, performance growth is sustainable.
The industrial valve market has high room for growth. According to GIA data, the global industrial valve market size is 82.1 billion US dollars in 2023, and is expected to reach 92.3 billion US dollars by 2026. The industry has the characteristics of vast space, downstream dispersion, and low concentration. As a leading domestic high-end industrial valve, the company has significant advantages in product layout+technical strength+customer resources. As products are advanced and application areas expand, structural optimization and share growth will drive growth: (1) The company's products cover ten major series of ball valves, butterfly valves, gate valves, stop valves, check valves, control valves, etc., and basically have the ability to provide a full range of valve solutions for the oil and gas, chemical, marine, electricity and energy industries. (2) The company's valve manufacturing process is fully covered. The product has excellent performance, strong stability, guaranteed delivery, and a perfect R&D team. High-end new products continue to fill the domestic gap. (3) After more than 20 years of accumulation, the company has formed a high level of brand market recognition, complete domestic and foreign channel construction, and excellent customer resources. It has entered the supply chain of large multinational enterprise groups such as SHELL, TOTAL, CNPC, and Sinopec, and has a stable leading position.
Equity incentives motivate the team and demonstrate the company's long-term development confidence. In April 2024, the company released the 2023 Restricted Stock Incentive Plan (revised draft). It is intended to grant a total of 133 company executives, middle management and key personnel 16.6435 million shares of restricted shares, accounting for 2.22% of the total share capital on the announcement date. The performance assessment target is that the 2023-2025 net profit to mother should not be less than 0.67/0.74/0.81 billion yuan. The equity incentive plan helps bind core employees, motivate the team, and demonstrate confidence in the company's long-term development.
Profit forecast and investment rating: The company's performance exceeded expectations. We raised our 2024-2026 net profit forecast of 9.5 (original value 8.4) /11.2 (original value 10.1) /13.0 (original value 1.19) billion yuan. The current market value corresponds to PE of 14/12/10 times, maintaining the “buy” rating.
Risk warning: geopolitical risks, rising raw material prices, risk of exchange rate fluctuations, oil and gas industry cycle fluctuations