\u3000\u3 Guocheng Mining Co.Ltd(000688) 777 Zhejiang Supcon Technology Co.Ltd(688777) )
The growth of industrial giants is inseparable from the dividends of the times. From industry 1.0 to industry 4.0, the improvement of intelligence and the maturity of industrial software system provide fertile ground for the growth of industrial giants. Overseas giants are not only the promoters of the industrialization process in Europe and America, but also the witnesses and beneficiaries. In 2020, the proportion of employed population in China’s primary industry decreased to 24%, which is close to the middle of industrialization, and the global proportion of industrial added value has also reached 26%. At the same time, with the high-frequency support of policies, it is urgent for China’s industrial software to keep pace with the world. Horizontally comparing the development history of European industrial giants, we believe that China’s industrial intelligence and industrial software industry have shown dividends of the times. The growth process of Dassault, a European industrial giant, can be described as “a stone from another mountain”. The combination of high-intensity R & D investment and continuous M & A is worthy of our Chinese industrial intelligence and industrial software enterprises to learn and emulate.
Not just DCS: how to view the long-term development of Zhejiang Supcon Technology Co.Ltd(688777) . 1) From industry 3.0 to industry 4.0, from single control system to solution, the whole industrial process layout of the company has become a big cake, enabling the downstream intelligent transformation. Reflected in the financial data, the proportion of revenue from automatic instruments and industrial software continued to increase, and the revenue structure continued to be optimized. In SIS and other new markets, the company is also moving forward at full speed, attacking multiple categories at the same time, and constantly achieving “zero” breakthroughs. We think it is biased to judge the development of the company with DCS single product as anchor. 2) The word “instrument” is not synonymous with low-end products. The price of high-end precision instrument valves can even exceed one million yuan. In the future, with the gradual medium and high-end of the company’s instrument product line (currently taking the medium and low-end volume as the main strategy), it is expected to bring a stronger boost to the company’s long-term development and market awareness. At the same time, with the continuous breakthrough of the company’s instrument business in “three barrels of oil”, it is expected to bring the expansion of customer coverage and accelerate the growth of sector revenue in the future. 3) 5S service station is a “sentry”. 5S service station opens up the “last mile” of customer service in the park, improves customer stickiness, integrates industrial resources and speeds up product iteration. It can not simply judge the size of strategic value based on its business gross profit margin. 4) “Software determines height and hardware determines foundation”. The commercial nature of industrial software in the process industry determines that its downstream demand is fragmented and non standardized, and the business model needs to follow the high-end, professional and customized route. Therefore, although the industrial software track has a huge long-term space, it should not be too demanding in the short term. The proportion of the company’s industrial software revenue should increase rapidly.
How to understand the valuation of Zhejiang Supcon Technology Co.Ltd(688777) ? The peg of overseas comparable industrial software giant is significantly greater than 1, and the extremely high technical barriers bring considerable valuation premium. From the control system to the overall solution, the combination of product hardware performance and industry know-how will further enhance the customer stickiness. The extremely high industrial barriers and the current high scenery of the track are expected to bring the company’s valuation center upward.
Maintain the “buy” rating. We expect that the company’s operating revenue will reach 4.52 billion yuan, 6.05 billion yuan and 7.97 billion yuan respectively from 2021 to 2023, and the net profit attributable to the parent will reach 577 million yuan, 744 million yuan and 1.062 billion yuan. At the same time, the company’s stock price is at the historical bottom of valuation, showing excellent long-term layout opportunities based on the industrial perspective, giving the company 116 billion yuan of long-term market value space under the neutral assumption, Maintain the “buy” rating.
Risk warning: fluctuation risk of downstream industry; R & D investment is less than expected; Import risks of some important raw materials; Covid-19 outbreak is a risk of continuous fermentation.
