The current situation of the company
Shanghai will carry out garbage sorting from July 1, arousing investors' interest in food waste processors.
Comment
Application of kitchen waste machines: 1) countries that strictly implement garbage classification will generate market demand for kitchen waste machines. 2) North American families will install kitchen waste grinders under the kitchen sink, and the food waste products can be crushed and discharged directly into the sewers. This product is suitable for villas, but not for apartments. After the apartment is used, it is easy to cause sewer blockage and safety risks caused by biogas. 3) Japanese and Korean families use kitchen waste processors to decompose organic food waste into organic fertilizers, and decompose the tail gas into carbon dioxide and water vapor.
The company's kitchen waste processor products are microbiological products, before the products were mainly exported to South Korea, the peak annual sales of 9.97 million yuan (2012), and then due to restrictions on the export of microorganisms, the company stopped exporting to South Korea in 2015. At present, the annual sales of this product in China is very low.
Although there will be more and more cities in China to promote garbage classification, it is still difficult to popularize the Chinese kitchen waste machine market: 1) Chinese buildings are not suitable to install kitchen waste shredders. 2) the kitchen waste processor using microorganisms will occupy a limited area of the kitchen, while consumers still need to deal with organic fertilizer, which is of low practical value.
We believe that the kitchen waste processor is not the development direction of the company, the company's strategy is household appliance drainage pumps, as well as automotive electronic pumps. Recently, the company announced that it will acquire Shenpeng Electronics with 2018 10x Ppace E. after the acquisition, the company will improve the layout of the household appliance drainage pump market and expand to automotive electronic water pumps.
Valuation proposal
Maintain the 2019 EPS 2020 forecast of 0.33 USD 0.37 yuan. Maintain a neutral rating. Maintain the target price of 6.65 yuan, corresponding to 20x/18x 2019 Universe 20e Pax E, compared with the current stock price increase space of 19%. The current share price of the company corresponds to 17x/15x 2019 Universe 20e P Unix E.
Risk
RMB exchange rate fluctuation risk, Sino-US trade friction risk, new business development risk.
