\u3000\u3 Guocheng Mining Co.Ltd(000688) 330 Shanghai Holystar Information Technology Co.Ltd(688330) )
Key investment points
The company is a leading enterprise in China’s distribution network intelligent column switch
The company is mainly engaged in intelligent equipment of distribution network such as intelligent column switches and fault indicators, and its revenue has maintained a high growth rate in recent years.
From 2017 to 2020, the operating revenue increased from RMB 252 million to RMB 909 million, the three-year CAGR was 53.24%, the net profit attributable to the parent increased from RMB 32 million to RMB 318 million, and the three-year CAGR was 114.59%. In the first three quarters of 2021, the company achieved an operating revenue of 787 million yuan, a year-on-year increase of 15.34%, and a net profit attributable to the parent company of 328 million yuan, a year-on-year increase of 28.67%.
The intelligent construction of distribution network is accelerated, giving birth to the demand of “primary and secondary integration”
Smart grid, which can meet the diversified load needs of new energy, distributed power generation and electric vehicles, has become the main direction of power grid development in the future. The “one or two fusion” equipment is advanced in multi-function integration and function, and better matches the actual operation needs of the distribution network, and has gradually become the mainstream technology of the market. In 2018, there were 4.476 million distribution switches on 6-20kv distribution lines in China, and the replacement demand was estimated to be 803400; By 2020, the coverage rate of intelligent distribution equipment has increased significantly to 70%.
The company’s intelligent column switch realizes primary and secondary deep integration, and the research and judgment accuracy is leading in the industry
The company has fully integrated and integrated the control terminal into the switch body, and successfully developed an intelligent column switch with “primary and secondary full integration”. The switch does not need cable connection, which can reduce the fault points of the equipment and facilitate installation and use. In the long-term operation, the company has accumulated a large number of fault data in the operation of distribution network, developed the fault research and judgment algorithm and model of distribution network by using big data, and added adaptive control technology in the fifth generation intelligent column switch, which will automatically verify, optimize and adjust the parameters of the model according to the working conditions of line operation, so as to gradually improve the model without manual calculation and regular verification of set values. At present, the research and judgment accuracy of short circuit fault of the company’s products has increased to more than 99%, the research and judgment accuracy of single-phase grounding fault has increased to 90%, and the reclosing accuracy is close to 100%.
The sales are oriented to the State Grid and the regional market has made a rapid breakthrough
The company’s main customers are the power supply companies subordinate to the State Grid. The sales accounts for 67.17%, 82.20% and 71.38% respectively from 2018 to 2020. The degree of order completion and the certainty of payment collection are high. Based on Zhejiang, the company estimates that there is still about 291000 sets of space in the distribution network of the province, which is 9.95 times the cumulative sales volume of the company to State Grid Zhejiang by the end of 2019. The company is actively exploring the market outside Zhejiang and gradually promoting it to other provinces in the form of pilot trial. In 2021, the company has more products put into operation in Jiangsu, Shandong, Henan, Fujian and other regions, especially in Jiangsu market, and the market expansion is in the accelerated stage.
Profit forecast and valuation
The company is a leading enterprise of intelligent column switch in distribution network in China, benefiting from the acceleration of intelligent construction of distribution network. We estimate that the net profit attributable to the parent company from 2021 to 2023 will be 413, 525 and 627 million yuan, corresponding to EPS of 413, 525 and 6.27 yuan / share, and the current share price corresponding to PE of 27, 22 and 18 times. In 2022, the industry average PE is 28 times. Considering the growth and safety margin of the company’s performance, we give the company 28 times of PE valuation in 2022, which corresponds to 27% of the current stock price. For the first time, give a “buy” rating.
Risk tips
(1) the risk of sales concentrated in the State Grid; (2) High concentration of business areas and the risk that the expansion of new markets is less than expected; (3) Risk of single product structure.
