Leading domestic elevator components, entering the new energy circuit

① The company is a leading elevator component company, creating a new growth point for energy storage and new energy power plants. The company is a leading domestic elevator parts company. In 2021, the company acquired Tianqi Hongyuan and entered the energy storage and new energy power plant circuit. Currently, the company has formed a dual main business layout of “traditional infrastructure” for the elevator parts business and “new infrastructure” for energy-side reforms. The collaborative development of old and new businesses provides growth momentum.

② The company has entered a stage of rapid growth. In 2016-2023, the company's revenue grew from 1.103 billion yuan to 2.433 billion yuan, with a CAGR of about 11.96%; the company's net profit fluctuated to a certain extent. In 2023, with the rapid development of the new energy business, the company entered a stage of rapid growth. In the first three quarters of 2024, the company achieved net profit of 0.22 billion yuan, an increase of 52.57% over the previous year. The company's growth momentum is expected to continue as policies drive the renewal and replacement of elevators, the release of demand to install elevators in old buildings, and the rapid development of energy storage and power plant construction businesses.

The renewal and installation market brings new opportunities, and the company's elevator business is expected to grow steadily ① The elevator industry is being dragged down by the real estate slump, and the installation and renovation have brought growth points. Currently, due to poor real estate sentiment, demand in the elevator industry is weak, but demand for installation, renewal and replacement is expected to drive demand growth: I.

Installing new elevators in old houses: According to statistics from the China Elevator Association, as of the end of 2023, there are about 50 million homes in China that have not been equipped with elevators and are eligible for installation. The total installation market is expected to be over 2.5 million units, and the demand space exceeds 500 billion yuan. With policy encouragement, installation demand is expected to be gradually released; II. Renewal and transformation requirements:

According to estimates, the demand for elevator renewal in 2024-2026 was 0.1137, 0.1366, and 0.1693 million units, respectively.

② The company's elevator business is expected to develop steadily. The elevator industry is highly concentrated, and some elevator parts manufacturers with advantages such as quality, process technology, and delivery speed are favored by downstream elevator manufacturers and maintain stable cooperative relationships with downstream customers. The company has a complete range of elevator parts products to meet the “one-stop and diversified” procurement needs of elevator companies. It cooperates closely with major customers throughout the elevator, and the company's elevator business is expected to develop steadily.

Actively lay out the energy storage/new energy sector to achieve rapid growth

① The installed scale of energy storage is growing rapidly. According to CNESA, by the end of 2023, China had put into operation a cumulative installed capacity of 86.5 GW, an increase of 45% over the previous year. Among them, the total installed capacity of the new energy storage was 34.5 GW, an increase of 166% over the previous year. In the first half of 2024, China's new energy storage system added 13.67 GW/33.41 GWh of installed capacity, increasing both power scale and energy scale by 71% year on year. According to CNESA forecasts, under conservative and ideal scenarios, the cumulative installed scale of new energy storage systems is expected to reach 168.7 GW and 220.9 GW respectively in 2028, with compound growth rates of 37.4% and 45.0% respectively in 2024-2028.

② Tianqi Hongyuan has significant technical advantages, and full orders guarantee growth. Tianqi Hongyuan has formed its unique “3S technology+AI intelligent module+balance technology” intelligent string energy storage solution. At the same time, the company team is experienced. The core management team has more than 10 years of project management, development, investment, system design, construction management, microgrid application and R&D experience in the field of renewable energy and energy storage. The company has plenty of orders in hand to ensure rapid growth.

Profit forecast. The company is a leader in elevator parts in China. The improvement in the profitability of the elevator parts business and the increase in energy storage/new energy prosperity have accelerated the company's development. We expect that in 2024-2026, the company's revenue will be 2.974, 3.472, 4.117 billion yuan, and net profit to mother will be 0.313, 0.389, and 0.474 billion yuan, respectively. The closing price on December 5 is 17.4, 13.9, and 11.4 times PE, respectively. Covered for the first time, a “gain” rating was given.

Risk warning. The risk of fluctuations in raw material prices; the risk of slowing industry growth; the risk of increased market competition; the risk of deviations in market space estimation; the risk of untimely update of data quoted in the report, etc.