Core views

Company Profile: Established in 1958, Ningbo Water Meter (Group) Co., Ltd. is an industry-leading manufacturer of water metering products. The company's core products are water meters, covering a full range of civil and industrial cold and thermal mechanical water meters, smart water meters and multi-parameter water meters, serving more than 2,300 domestic water companies and exporting to more than 80 countries and regions. On the basis of traditional hardware products such as water meters, the company has also developed a smart water business in depth around its main business.

Financial analysis: The company maintained a relatively rapid increase in revenue and net profit to mother until 2019. Subsequently, it weakened relatively under the influence of overall macroeconomic factors and the pace of industry development, etc., and the company's overall business growth was adversely affected to a certain extent. In 2023, the company's revenue and net profit growth rate rebounded from bottom to bottom against the backdrop of a recovery in the overall market environment.

Industry introduction: According to the forecasts of Boyan Consulting and Ningshui Group Corporation, in 2027, China's overall demand for water meters will reach 0.238 billion, and sales revenue will reach 25.4 billion yuan.

Core highlights: 1) As an industry leader, the company continues to invest in R&D, responsible for drafting or participating in drafting a number of water meter industry standards, and establishing a perfect R&D, supply, production and marketing system to achieve strength; 2) With its accumulation in the water metering industry for more than 60 years, especially in terms of channel resources and technical capabilities, the company will turn smart water services into the second growth curve for its development; 3) Although macroeconomic indices such as real estate and manufacturing continued to be relatively low in the first half of 2024, we believe that macroeconomics may be expected to enter the second half of the year back and forth Wen, and related industries such as water meters are also expected to benefit.

Investment advice

We expect the company's revenue for 2024-26 to be 1.85, 2.12, and 2.45 billion yuan, respectively, with year-on-year growth rates of 3.6%, 14.7%, and 15.4%; net profit to mother will be 0.13, 0.14, and 0.16 billion yuan, respectively, with year-on-year growth rates of 1.5%, 6.8%, and 12%. According to the closing price on July 26, the corresponding PE market value was 14/13/12 times, respectively. Considering Ningshui Group's leading position in the water meter industry and the development potential of the second growth curve in smart water services, we believe it should have a certain valuation premium compared to the industry average.

The first coverage gave the company an “gain” rating.

Risk warning

There is a risk of declining demand, the risk that competition in the water meter industry will further increase the risk, the risk of overseas development being hindered, and the risk of raw material prices.