Centre Testing International Group Co.Ltd(300012) (300012)
In this report, we selected representative overseas leaders SGS, BV and Eurofins, sorted out their development history and growth experience, and compared them with China testing, so as to clarify the core competitiveness and future growth path of third-party comprehensive testing enterprises.
Strong competitiveness of overseas testing leaders: 1) extensive expansion enriches business lines. SGS, BV and Eurofins have developed from single business in the early stage to full category business line coverage through diversified expansion, with multi plate layout and leading market share; 2) Focusing on endogenous growth, the three leading international testing enterprises have laid laboratories and offices around the world, and the global network layout has been basically completed. We have split the revenue contribution of the leading enterprises, and found that the proportion of endogenous growth in the total revenue of the three enterprises has been increasing, and the growth rate of the laboratory is more correlated with the growth rate of the total revenue, It highlights the significance of endogenous growth rate to the testing industry.
As a benchmark for overseas leaders, China Measurement extension M & A has promoted the internationalization process, and the laboratory network layout has begun to show scale: it is closer to the M & a logic of SGS and Eurofins, and China Measurement M & A is also relatively scattered. A total of 25 m & A have been completed in ten years. In addition to supplementing its own business, it is more about constantly broadening its business boundary. In 2020, it acquired maritec PteLtd, a Singapore marine oil testing company, which announced that China testing officially moved towards internationalization. In terms of endogenesis, China testing has comprehensively arranged various types of laboratories. By 2020, 150 laboratories have been built, covering many fields such as chemistry, biology, physics, machinery and electromagnetism. The layout of outlets in China has been basically completed.
In the 100 billion testing market, there is still room for improvement in the market share of the market segments: 1) we select the representative local old brand business of BV as the object of calculating the market share. The results show that it is possible for Chinese testing enterprises to achieve a market share of more than 20% in the advantageous business areas. As the leader of China’s testing industry, China testing currently has a market share of only 5% in the food testing market, There is still broad room for growth in the future; 2) The medical sector is in full layout. This year, CETC invested and set up wholly-owned subsidiaries in Tianjin, Qingdao, Yunnan, Beijing, Suzhou and other places to layout PCR laboratory projects to further improve the business capacity of medical testing; 3) In the automotive sector, the rapid growth of the new energy vehicle market has led to a significant increase in EMC testing demand. It is expected to invest more resources in automotive electronic reliability testing and new energy vehicle testing, so as to improve the revenue volume of the automotive product line; 4) In the industrial products sector, on the one hand, the market capacity of measurement and calibration is large, and China measurement has introduced a new team. At the same time, the national policy is gradually liberalized, which is expected to continuously obtain more market share and is expected to bring a new round of growth; On the other hand, industrial testing business has blossomed at many points, and the change of China’s real estate model has brought new development to building testing. Substantial progress has been made in the fields of major transportation and fire prevention and flame retardancy, which are expected to bring new growth.
The fine management of CETC has achieved results, and the future growth can be expected: change the assessment mechanism to promote the continuous growth of per capita output value. The per capita profit level of CETC is high, and there is still room for improvement compared with overseas leaders; Optimizing operation and management, showing scale effect, higher net interest rate than overseas leaders and excellent profitability; Excellent net cash ratio and good business model; Although the capital expenditure / revenue is high, we believe that as an enterprise in the period of business development, the high level of huatest is more reasonable; Operating cash flow / capital expenditure and roe are still low compared with overseas leaders, but their levels continue to improve, and their growth can be expected in the future.
Profit forecast: it is estimated that the net profit attributable to the parent company from 2021 to 2023 will be 761 million, 956 million and 1228 million respectively, yoy will be 31.71%, 25.61% and 28.49%, and the corresponding PE will be 56x, 44x and 35x. From the valuation of overseas testing enterprises, the ratio of Eurofins to manufacturing PE of Paris Stock Exchange has reached an average of 2.0 in recent 9 years. As of December 22, the ratio of China testing to manufacturing PE of CSRC was 1.6, with an increase space of 24.62%. According to DCF valuation, as of December 23, it is estimated that the target market value is about 56.244 billion yuan, corresponding to the target price of 33.63 yuan. Calculated according to the net profit attributable to the parent company in 2021, the corresponding PE is 73.9x, and the current market value of China test is 42.871 billion, with an increase space of 31.91%, maintaining the “buy” rating.
Risk tips: repeated covid-19 epidemic, lower than expected development of downstream industries, intensified market competition, lower than expected policies, risk of M & a decision and M & A integration, risk of adverse events affecting credibility and brand, failure of trade recovery to meet expectations, risk of cross market valuation analysis.
