Zhejiang Supcon Technology Co.Ltd(688777) performance express comments: the performance exceeds market expectations and opens a new chapter with PCCW

\u3000\u3 Guocheng Mining Co.Ltd(000688) 777 Zhejiang Supcon Technology Co.Ltd(688777) )

Event: on February 24, 2022, the company released the 2021 annual performance express; The company issued an announcement on the acquisition of 22% equity of Sinopec Yingke Information Technology Co., Ltd. in cash.

The performance exceeded market expectations, and the revenue and profit maintained rapid growth. According to the company's performance express, the company's annual revenue in 2021 reached 4.519 billion yuan, a year-on-year increase of 43.08%; In 2021, the net profit attributable to the parent company reached 578 million yuan, a year-on-year increase of 36.54%; In 2021, the annual net profit deducted from non parent company reached 452 million yuan, with a year-on-year increase of 39.10%, and the overall performance exceeded market expectations.

Take a stake in PCCW and start a new chapter hand in hand. According to the company's announcement, the company plans to acquire 22% equity of Sinopec Yingke Information Technology Co., Ltd. with cash of 561 million yuan. Based on industrial software, relying on years of best practice experience in informatization in the energy and chemical industry, and facing the trend of industrial interconnection in the future, Yingke Petrochemical Co., Ltd. has laid out several business segments, including planning consultation, operation and management, production management and operation and maintenance, to provide all-round overall solutions and services for the informatization construction of enterprises in the energy and chemical industry, It has achieved complete, independent and controllable information solutions and it services covering the whole upstream, middle and downstream industrial chain and all levels. We believe that through equity participation, the company is expected to strengthen cooperation with PCCW, strengthen the strategic layout of the company's "industry 3.0 + industry 4.0" and 5T business, and enhance the company's comprehensive competitiveness in the field of digitization and intelligence.

The digital transformation of process industry is the general trend, and the tide of intelligent manufacturing is expected to help the company move forward. According to the company's announcement, the digital transformation of China's process industry will be further upgraded in 2021. The demand of the manufacturing industry for high-end automation, digitization and intelligence is rising, and the demand of downstream customers is strong. Through the new Wuxi Online Offline Communication Information Technology Co.Ltd(300959) service mode of 5S automatic housekeeper and S2B platform, the company has realized the increase of customer coverage in the process industry, broke through multiple top customers, and further consolidated and improved its market position in China. On the other hand, in 2021, the company launched a new generation of control system series products, a new generation of industrial software products such as real-time database and intelligent factory platform software, adding the application scenarios of intelligent factory for downstream customers. According to the intelligent manufacturing development plan of the 14th five year plan, by 2025, 70% of manufacturing enterprises above designated size are expected to basically realize digital networking, more than 500 intelligent manufacturing demonstration plants are expected to be completed, and the market satisfaction rates of intelligent manufacturing equipment and industrial software are expected to exceed 70% and 50% respectively. We believe that with the development tide of intelligent manufacturing, the company is expected to become bigger and stronger.

Investment suggestion: as the leader of localized DCS, the company is expected to maintain its leading edge for a long time and gradually realize the upgrading of industrial 4.0 business model. We are optimistic about the leading position and development prospect of the company with both attack and defense. It is expected that the EPS of the company from 2021 to 2023 will be 1.18 yuan, 1.53 yuan and 2.02 yuan respectively, and the corresponding PE will be 62x, 48x and 36x respectively, maintaining the "recommended" rating.

Risk tip: the company's product market expansion is less than expected, and the intensification of market competition leads to the decline of product gross profit margin

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