\u3000\u3000 Xi’An Shaangu Power Co.Ltd(601369) (601369)
Leading manufacturer of energy-saving and emission reduction equipment, “double carbon” drives sustainable growth: the company is a leading company of energy conversion equipment in China. Based on energy-saving and emission reduction equipment such as axial compressor and TRT, it has successfully grown into a system solution provider and service provider in the field of distributed energy after two strategic transformations. Its customers are mainly in metallurgy and chemical industry, The market share of core products in the industry has an absolute advantage, mostly about 90%. After the transformation, the operation is stable, and the performance has entered the rising channel with strong certainty. It benefits from the constraints of the “double carbon” goal and has the ability of long-term sustainable growth.
Driven by the “double carbon” policy, there is a strong demand for equipment and services: after the supply side reform, the volume and price of steel rise together, benefiting from the marginal repair of the downstream metallurgical industry. The “double carbon” catalyzes transformation and upgrading / large for small / retreat from the city to the park. There are opportunities for structural demand for equipment. The demand for new equipment, equipment renewal and technological transformation all provide new driving force for the company’s energy conversion equipment and whole process services. In 2020, the company sold 107 / 57 / 21 axial compressors / TRT / air compressors respectively, with a year-on-year increase of 78% / 63% / 40% respectively. The operating revenue of 2021q1-3 was 8.1 billion yuan, with a year-on-year increase of + 37%, which was equivalent to the scale of 2020, and the net profit attributable to the parent company was 747 million yuan, exceeding that of 2020, with a year-on-year increase of + 33%.
Signing the world’s first hydrogen energy reduction project, Yongli is at the forefront of the new trend of hydrogen Metallurgy: hydrogen metallurgy is an ideal path for the metallurgical industry to decarbonize from the root. At present, China’s iron and steel enterprises are actively seeking low-carbon transformation, and the trend of R & D and reserve of major technologies has accelerated significantly. In March 2021, the company won the order of Zhangxuan high tech hydrogen energy development and utilization project demonstration project of Hegang group, and provided two sets of hydrogen rich process gas and cooling gas compressor system solutions for the hydrogen direct reduction process system of the project, marking that the company has taken a solid and effective step in the field of low-carbon smelting and developing clean energy such as hydrogen energy. With the accumulation of project technical experience, We believe that in the future, the company may have advantages in hydrogen metallurgy process and can give priority to orders.
The gas business is working hard again to catch up with the industry leader. The space of industrial gas market is stable. Under the background of “double carbon”, the transformation and upgrading of traditional manufacturing industry represented by metallurgy and chemical industry has greatly increased the demand for industrial gas. With the advantages of high product quality stability, high comprehensive utilization efficiency, low gas cost and flexible supply of gas for emerging industries, the proportion of outsourced gas supply has increased. The company plans to reform the gas operation business and increase investment. At present, the company’s gas business is growing rapidly, the project operation is healthy and orderly, the retail gas has made a breakthrough, and the service field extends to the food field. We believe that with the help of technology accumulation / state-owned assets background / management reform, the company’s gas business will set sail again.
Profit forecast, valuation and rating: benefiting from the supply side reform and carbon neutralization, the downstream profit is expected to improve, its capacity replacement and technology upgrading are strong, and it has long-term sustainability. As a leading company of energy conversion equipment, the company has high order acquisition ability and bargaining power, rich experience in EPC project, and the gas business plans to work again, which is expected to increase its performance. It is estimated that the net profit attributable to the parent company from 2021 to 2023 will be RMB 877 / 1103 / 1332 million, and the PE corresponding to the current stock price is 20x / 16x / 13X respectively. We use the relative valuation method to give the company a target price of RMB 13.74 (corresponding to 21.5x PE in 2022), and give a “buy” rating for the first time.
Risk warning: “double carbon” target constraint weakened and downstream demand slowed down; The order execution progress is less than expected; The growth rate of investment in gas operation business slowed down.
