Sieyuan Electric Co.Ltd(002028) (002028)
Leading power grid equipment to help global power construction. Sieyuan Electric Co.Ltd(002028) is a leading private enterprise in China’s power equipment. It basically has the manufacturing and supply capacity of full voltage primary equipment, and the layout of secondary equipment, SVG and super capacitor energy storage. In the first three quarters of 2021, the revenue was RMB 6.122 billion, with a year-on-year increase of 20.81%, and the net profit attributable to the parent company was RMB 889 million, with a year-on-year increase of 6.75%. The slowdown in profit growth was mainly affected by the rise in the price of upstream raw materials, the reduction of social security in the same period of 2020, and the change in the quarterly allocation method of employee bonus in 2021.
At the same time, China and foreign countries have made efforts, and the power grid equipment has increased steadily. China Southern Power Grid proposed to invest 670 billion yuan during the 14th Five Year Plan period, an increase of 51% over the actual investment in the 13th five year plan. The State Grid said that it plans to invest 350 billion US dollars in the upgrading of the power grid during the 14th Five Year Plan period. During the 14th Five Year Plan period, the demand for power equipment is expected to increase. In China, the company has a wide range of transmission and distribution products, and many products are in the leading position in the bid winning rate of State Grid bidding; In foreign countries, the company has arranged EPC projects for many years, and many products have passed the qualification certification of France, Britain, Spain, Ukraine, Thailand, Kazakhstan, Egypt, Mexico, Chile and other countries. By the end of 2020, 33 EPC projects are still in the implementation stage.
Veteran of reactive power compensation equipment, riding the east wind of new energy. The rapid increase in the installed capacity of new energy such as photovoltaic and wind power, as well as the increase in the electrification rate of the whole society, exacerbated the problem of power quality and gave birth to the demand for reactive power compensation equipment. According to the data of prospective industry research institute, it is expected that by 2023, the market scale of China’s power quality control industry will reach 174.5 billion yuan, including 6.2 billion yuan of high-voltage SVG market. According to the company’s official website, by 2020, the subsidiary Siyuan qingneng has put into operation more than 3000 sets of high-voltage SVG products and more than 10000 sets of low-voltage SVG / APF products. The products are widely used in all links of power generation, transmission and distribution.
The layout of super capacitor has great potential for energy storage business. Based on the energy storage mechanism and its own characteristics, supercapacitors have a variety of application scenarios and can also complement lithium batteries. At present, it is mainly used in transportation, new energy and industry. According to the data of toubao Research Institute, the market scale of super capacitor is expected to reach 18.1 billion yuan in 2022. The super capacitor start stop module developed by the subsidiary Shanghai fengmi automobile technology is matched with a hybrid model of Volvo cars, and more than 10000 sets have been shipped by the beginning of 2020; Sech SA, a wholly-owned subsidiary, has obtained the fixed-point notice of super capacitor suppliers from international well-known automotive electronic parts companies. The company has established a subsidiary, Jiangsu Siyuan battery technology, which will further expand the energy storage market in the future.
Profit forecast, valuation and rating: we estimate that the company’s operating revenue in 2021-23 will be RMB 9.0/10.88/13.17 billion respectively, the net profit attributable to the parent company will be RMB 1.25/15.9/1.96 billion respectively, and the corresponding EPS will be RMB 1.63/2.08/2.56. The current share price corresponds to 33 / 26 / 21 times of PE in 21-23 years respectively. Referring to the results of relative valuation and absolute valuation, considering the strong competitiveness of the company in the field of power grid equipment, it can effectively support the performance with the release of overseas EPC projects; Moreover, the company takes the lead in China in the field of SVG, and the super capacitor energy storage potential is large. The first coverage is given a “buy” rating.
Risk tips: Overseas EPC project risk, upstream raw material price rise risk, and intensified market competition risk
