Main points of investment
Jianke Co., Ltd. is a technical service enterprise with inspection and testing as its core business, special engineering professional services and new engineering materials. Benefiting from the strengthening of market development and the initial results of cross-regional layout, the company's revenue from outside Changzhou accounted for 51.54% in 2021. The compound growth rate of revenue from 2019-2021 was 19.20%, and the compound growth rate of return to home net profit was 42.64%. At the end of the 2022Q3, the company has a capital balance of 1.795 billion yuan, which can be used to expand production capacity, mergers and acquisitions and business areas in the future.
The testing industry is a good track for long slope and thick snow, and there is a lot of room for endogenous + epitaxial development. In 2021, the market revenue was 409.022 billion yuan, + 14.06% compared with the same period last year. From 2013 to 2021, the average annual compound growth rate was more than 14%. Construction engineering, building materials and environmental testing currently involved account for about 17%, 9% and 10% of the overall testing industry in 2021, respectively. At present, new demand continues to emerge in various fields with changes in industry policies, and the industry as a whole is growing steadily. In terms of competition pattern, at present, the market share of China testing, the largest in the industry, is only about 1.06%, and Jianke's shares account for 0.13% in 2021. The overall pattern of the industry is relatively scattered, mainly due to the characteristics of testing business, such as asset, regional, multi-domain and so on. Compared with overseas development paths, leading companies such as SGS, Eurofins, Intertek, BV and other leading companies have developed into international testing leaders with a scale of tens of billions of RMB and a high valuation premium through mergers and acquisitions and endogenous development.
Building materials and environmental protection testing as the core, cross-regional, cross-domain development of testing business. 1) strong credibility: the company has accumulated a good reputation and credibility through decades of development, and has won praise from provincial and municipal construction authorities for high-quality service; 2) pay attention to team incentives and efficiency improvement: the company has promoted employee stock ownership and enhanced incentives over the past 18 years, and recently released a new round of equity incentive plan bound to the core backbone, the per capita income of the company's inspectors has been continuously improved in the past three years, and the efficiency has been continuously optimized. 3) abundant capital on hand and accelerated development of endogenous extension: the company has raised 782 million yuan to help the company rapidly carry out market layout, and is expected to rapidly expand its business through mergers and acquisitions and the establishment of cross-regional subsidiaries, branches, offices and other forms. The company pays attention to R & D and innovation, continuously expands the scope of testing business, and the number of testing parameters continues to increase.
Profit forecast and investment rating: through the continuous expansion of the business field, the company focuses on increasing investment in inspection and testing business and the improvement of technical capabilities. Over-raising 782 million yuan helps the company to quickly carry out the market layout and issue a restricted stock incentive plan to stimulate the core backbone. The company has abundant capital on hand, low debt ratio, and the level of ROE is significantly higher than that of comparable companies. In the future, the company is expected to continue to strengthen testing and testing core business capabilities through M & An expansion.
We expect the company's 2022-2024 net profit to be 1.81,2.19 and 269 million yuan respectively, corresponding to 28X/23X/19X for PE, and to give "overweight" rating for the first time.
Risk hint: the risk of macro-cycle fluctuation and industrial policy change, the competition risk of cross-regional operation, and the risk caused by real estate regulation and control policy.