Hangzhou Boiler Group Co.Ltd(002534) (002534)
Event: ① the company issued a foreign investment announcement and planned to acquire 34.6667% equity of Lanjie energy technology (Shanghai) Co., Ltd. (hereinafter referred to as “Lanjie energy”), with a pre investment valuation of 225 million yuan and a corresponding equity transfer price of 78 million yuan. At the same time, the company plans to increase the capital of Lanjie energy by 75 million yuan. In addition, after the completion of this transaction, Lanjie energy plans to sign an equity transfer agreement with elpanneteknik Sweden AB (hereinafter referred to as “ELP company”) to acquire 57% equity of ELP company. After the completion of the transaction, Lanjie energy will hold 80% equity of ELP company. ② Lanjie energy performance: in 2020, the revenue was 85 million yuan and the net profit was 30 million yuan; In the first 11 months of 2021, the revenue was 102 million yuan and the net profit was 34 million yuan.
Lanjie energy: China’s leading supplier of electrode boilers, continuously expanding its application fields. Established in 2018, Lanjie energy is the only equipment sales and service provider of ELP in China. The latter, located in Sweden, is a world-famous supplier of submerged high-voltage electrode boilers. It is also one of the few companies in the world with high-voltage electrode boiler manufacturing technology. It specializes in manufacturing all kinds of high-voltage electrode boilers and supporting auxiliary equipment, focusing on the application of overseas nuclear power market. Its products have the advantages of zero emission, high safety, high power, high reliability and fast start, and have a thermal efficiency of more than 99.8%. Through the secondary development of the core technology of high-voltage electrode boiler in China, the core team of Lanjie energy has successfully realized the commercialization of special nuclear power equipment, and has widely applied the high-voltage electrode boiler in the fields of flexibility transformation of thermal power plants in China, waste air photoelectric consumption, coal to power regional heating and industrial steam. Since its establishment, Lanjie energy has successfully completed many major projects in the field of frequency and peak regulation in China, including Karamay, Chifeng, Chaoyang Yanshan lake, etc., and its technical strength is at the leading level in China’s electrode boiler market.
We will improve business coordination, flexibility in thermal power transformation, and market expansion. After the completion of this transaction, the company will become the controlling party of Lanjie energy and ELP, and ELP will also become the brand of electrode boiler under the company. We believe that the completion of this acquisition will not only bring new profit growth points to the company, but also provide better business coordination for the company:
(1) Enrich boiler product series and improve market competitiveness. The company’s traditional core business is waste heat boiler. It is the largest and most complete waste heat boiler development and manufacturing base in China, and has become a world leader in the field of gas turbine waste heat boiler. If the acquisition is successful, it will have a world-famous electrode boiler brand, enrich the company’s boiler product series, broaden application fields and improve market competitiveness.
(2) Or realize business collaboration with HEPP energy, and the market expansion of thermal power flexible transformation can be expected. In early November 2021, the company announced that it planned to acquire 51% shares of HEPP energy, which is mainly engaged in the transformation of new energy consumption and flexible peak shaving energy storage of thermal power units (mainly using electrode boilers as core equipment). At the policy level, recently, the national development and Reform Commission and the National Energy Administration jointly issued the notice on carrying out the transformation and upgrading of national coal-fired power units, which proposed that the flexibility transformation of coal-fired power units should be improved as much as possible, and 200 million kw of flexibility transformation should be completed during the 14th Five Year Plan period. It can be seen that there is an urgent demand for flexibility transformation in the thermal power field, and the market space is huge. The company has successively announced that it plans to acquire upstream and downstream enterprises in the thermal power flexibility transformation market (i.e. Lanjie energy, an upstream equipment enterprise, and Hepu energy, a downstream system integration enterprise), indicating that the company is actively arranging the thermal power flexibility transformation market and can be expected in the future.
Maintain the “buy” rating: regardless of the acquisition thickening of HEPP energy and Lanjie energy, we expect the net profit from 2021 to 2023 to be RMB 506 / 852 / 1172 million, with a corresponding valuation of 46 / 27 / 20 times.
Risk tips: the industrialization process of molten salt energy storage is less than expected, the expansion progress of the company’s molten salt energy storage business is less than expected, the risk of decline in profitability caused by the rise in the price of raw materials, the risk of deviation in the calculation of industry market scale, the risk of order landing less than expected, etc.
