Main points of investment
Composite external insulation invisible faucet. Shenma Electric Power has been ploughing electric composite external insulation for more than 20 years and is the leader in the international electric power composite external insulation industry. Strategically implement the concept of "high-end leadership", "capture UHV first at home, then cover UHV and UHV", and overseas "cooperate with global leaders to drive other customers". High-quality customer structure, binding to the national network, southern grid, GE, ABB, Siemens and other leaders, the product has rich experience, and has been widely recognized by end customers.
In 2020, the global insulator market is nearly 100 billion yuan, and composite insulators are expected to gradually replace traditional materials. Insulators are widely used in transmission and distribution lines, substations and other occasions, with a global market of nearly 100 billion yuan and a domestic market of more than 20 billion yuan, of which 50% are used in transmission and distribution links and the rest in substations and distribution networks. we expect the industry scale to maintain a steady trend. By 2020, there are three technical routes of porcelain, glass and composite insulators in the industry, among which: 1) the permeability of composite insulators on transmission lines is relatively high, but the increase in permeability has been relatively stagnant since 2016 due to short service life. In recent years, with the application of long-life insulator materials by Shenma and other companies, the permeability is expected to continue to increase. 2) the substation link used to be dominated by porcelain insulators represented by NGK in Japan and PPC in Germany, but the application of composite materials in UHV and UHV fields began to permeate in 2020, and the substation composite external insulation of all kinds of equipment in 2020 was fully incorporated into the grid company's material standardized procurement plan, with a permeability of about 25% in 2020 (the company's scheduled increase plan data), which is expected to continue to improve in the future. 3) the composite cross-bearing tower in the field of distribution network has also begun to replace the traditional technology.
The pattern of high-end composite insulators is clear, and the god horse locks the leading position. Although the pattern of the insulator industry is relatively scattered, the high-end application market, such as the substation insulator market, especially the substation composite insulator market, has a clear competition pattern, high market share and outstanding profitability.
From the perspective of downstream application fields: 1) Shenma in the field of substation insulators is already a leader in the industry, especially in UHV and other high voltage grade sales share of more than 70%, with the accelerated infiltration of composite insulators in the future, Shenma growth is expected to accelerate significantly 2) in the field of transmission and distribution lines, the life cycle cost of the 30-year long-life line composite insulators developed by Shenma has obvious advantages, which is only 20-40% of the cost of traditional materials. In the future, the market penetration at home and abroad is expected to increase rapidly; 3) the company has stored new products such as composite towers and composite sleeves, and is expected to gradually enter the volume stage in the future.
Profit forecast and investment rating: we expect the company's 2021-23 net profit to be 229 million yuan, 318 million yuan and 440 million yuan respectively, which is + 74.8%, + 39.2% and + 38.2% respectively over the same period last year. Corresponding to the current price (August 9) PE is 28 times, 20 times and 15 times respectively. Comparable companies are leaders in the subdivision of power equipment, with an average PE of 27 times in 2021. Considering that the advantage of composite insulator life cycle cost is prominent, national network procurement policy and other reasons are expected to accelerate its permeability, the company is expected to benefit first by virtue of cost-effective products and rich experience in network operation. 2021 35 times PE as the valuation basis, the target price of 19.95 yuan, the first coverage to give "overweight" rating.
Risk tips: investment growth is declining, policies are not up to expectations, and price competition is higher than expected.