The recovery in real estate is driving the post-real estate cycle. The sales area growth rate of commercial housing bottomed out in February 2019 and rebounded in March 2019. Driven by a recovery in sales, real estate development investment and the growth rate of new housing construction area both rebounded. Among them, the growth rate of new housing construction area rebounded to 11.90%. Furthermore, due to the tightening of real estate financing space in 2018, real estate companies accelerated pre-sale repayment, and the new construction area increased dramatically. The delay until 2019 will be reflected in a continuous recovery in construction area and completed area. The dual effects of inertial effects of last year's new construction area and the recovery in sales this year will drive the recovery of the elevator industry.
The installation of old buildings and the renewal of old elevators release demand for elevators. Since the 80s, there have been 8 billion square meters of existing buildings built without elevators. According to the number of registered house modifications, it is conservatively estimated that the demand for elevators is 2 million units. At the same time, starting in January 2019, the Development and Reform Commission proposed a subsidy plan for installing elevators in old buildings, which is of great significance in promoting elevator renovation in old buildings.
The maintenance business is expected to become a new growth point. The use of elevators has gradually improved, and the addition and renewal of elevators has entered a steady period. Elevator companies will shift from manufacturing to service. Taking the US elevator industry as an example, the average maintenance business revenue share in the industry has reached 50%. Shanghai Mechatronics Installation and maintenance revenue reached 6 billion yuan in 2018, accounting for 30% of revenue, but there is still plenty of room for growth at the international level.
The speed reducer business creates potential future growth space for the company. My country's robots The installed capacity increased significantly, from 25 units/10,000 units in 2013 to 100 units/10,000 people in 2017, and the cumulative sales volume of industrial robots reached nearly 0.5 million units. Precision reducers are the core components and main costs of modern industrial robots. They account for about 35% of robot costs and are the core cost component. The widespread use of industrial robots brings stable demand space for speed reducers. The joint production of speed reducers by Shanghai Electromechanical and Nabotsk is expected to seize the growing opportunities of demand and bring new growth space to the company.
Profit forecast: We expect the company to achieve operating income of 23.4 billion yuan, 25.8 billion yuan, and 28.5 billion yuan respectively; net profit to mother of 1.41 billion yuan, 1.62 billion yuan and 1.86 billion yuan respectively, EPS of 1.38 yuan, 1.58 yuan and 1.82 yuan respectively, and corresponding PE of 11X, 10X and 8X respectively. First coverage, giving a “Highly Recommended” rating.
Shanghai Electromechanical (600835) elevator business is picking up steadily, and speed reducers have potential room for growth