Key points of investment:
Deeply involved in cryogenic technology and equipment, focusing on scientific research and development, it has become a benchmark enterprise in the industry. The company was founded in 2006 and specializes in cryogenic technology devices in the field of chemical energy. Its products are mainly used in energy, chemical, natural gas, hydrogen energy, electronic gas, rare gases and other industries, and its customers have expanded from domestic to global. In 2023, the company's revenue was 3,047 million yuan and net profit was 350 million yuan, an increase of 19.36% over the previous year. The increase in the company's net profit is mainly due to the increase in on-hand orders year by year, from 929 million yuan in 2015 to 2,133 billion yuan in 2023, with a compound growth rate of 23.10%. At present, the company has mastered the design and manufacturing process of core equipment for cryogenic technology, and the company and its subsidiaries have obtained 70 patents so far, including 27 invention patents and 31 patents currently being applied for, covering various technical fields and forward-looking research and development, and has sufficient technical reserves to cope with market changes.
The basic market of cryogenic technology equipment+urban combustion operation continues to be consolidated, and equipment going overseas will support traditional business and bring growth. Currently, the company's basic market business is cryogenic equipment and urban gas operations, accounting for 98.36%. In 2023, in the cryogenic equipment business, the company has manufacturing capabilities that meet global standards. With the advantages of product quality and technology in a leading position in the market, it not only became the main supplier for project owners domestically, but also exported the company's products to 46 countries and regions including the United States, the European Union, Africa, Central Asia and Southeast Asia. Precisely because the company's cryogenic equipment went overseas, the gross margin of the equipment sector increased significantly in 2023, and the gross margin increased from 29.65% in 2022 to 36.30%. On the urban fuel operation business side, the company acquired 100% of Shandong Zhongyi Gas shares in 2019. This sector contributes steadily to the company's profits and cash flow every year. The business accounts for 64.99% of revenue. It is expected that the urban combustion business will be stable and profitable in the future. At the same time, as the volume and price increase brought about by the equipment sector going overseas, the revenue structure will be skewed towards the equipment sector, thus making the overall basic market business changes more solid.
The addition of gas operation business+hydrogen energy business is worth looking forward to. With years of experience in cryogenic equipment manufacturing, the company has entered new industries such as gas operation and the upstream hydrogen energy industry chain. In terms of gas operations, in 2023, the company's first self-invested bulk gas project entered the stable gas supply phase in the fourth quarter, which is expected to continue to bring positive profits to the company in the future. At the same time, the company has improved its rare gas product matrix. The company already has preparation and purification technology for rare gases such as krypton, neon, and xenon. Currently, the first BOG helium extraction device developed and manufactured independently has been successfully delivered and is running smoothly. Due to the difficulty of extracting rare gases, it is easy to see a sharp rise in price due to supply gaps when demand increases, so it is expected to become the company's second growth curve in the future. In the hydrogen energy business, the company has completed trial production of small hydrogen liquefaction prototypes, and has begun forward-looking technology research and development in the expansion and application of hydrogen energy technology in other energy and chemical fields to further expand the technical layout of hydrogen energy to make up for the lack of medium distance hydrogen transport technology in the upstream “production, storage, transportation and addition” process of the hydrogen energy industry in China.
Profit forecast and valuation: We expect the company's 2024-2026 net profit to be 4.47, 6.08 billion yuan, and 708 million yuan, corresponding EPS of 1.17, 1.59, and 1.85 yuan/share, respectively. Currently, the corresponding stock price is 11, 8, and 7 times the PE valuation, respectively.
The equipment manufacturing industry in which the company is located still has broad room for growth. As a benchmark enterprise deeply involved in the cryogenic technology equipment industry, the company's traditional manufacturing and emerging businesses are two-wheel drive, giving the industry average 14 times PE in 2024, corresponding to a target price of 16.31 yuan, which is covered for the first time to give it a “buy” rating.
Risk warning: Macroeconomic fluctuations cause new orders from enterprises to fall short of expectations, risk of fluctuating raw material costs, and lower progress in the rare gas business than expected.