\u3000\u3 Shengda Resources Co.Ltd(000603) 855 Warom Technology Incorporated Company(603855) )
For more than 30 years, it has become the leader of explosion-proof electrical appliances in China, benefiting from the oil and gas expenditure cycle and the large demand for non oil and gas. Founded in 1985, the company has been engaged in the research, development, production and manufacturing of explosion-proof electrical appliances since its establishment. In 2005, one belt, one road to the overseas market, and the FM certification in 2014, respectively, set up branches in Dubai and Hongkong in 2018 and 2019, and accelerated the global layout by taking advantage of the “one belt and one road”. At present, the company’s explosion-proof electrical appliance business occupies the first place in the industry in China. From 2016 to 2020, the compound growth rate of the company’s revenue was 17.4%, and the compound growth rate of the net profit attributable to the parent company was 23.2%. In 2020, the explosion-proof electrical appliance business achieved a total revenue of 1.607 billion yuan. According to the prediction of Huajing Industry Research Institute, the market scale of explosion-proof electrical appliances in China will be 7 billion yuan in 2019 and is expected to increase to more than 12 billion yuan by 2025; The global demand for explosion-proof electrical appliances in 2019 is US $5 billion, and it is expected that the global explosion-proof electrical appliance market will reach US $8 billion by 2025. The changes of the industry in 2022 are as follows: 1) the increase of global oil and gas expenditure is expected to drive the company’s product demand. Oil and gas is an important area of the company’s downstream demand. With the continuous rise of oil price, the growth rate of global oil and gas capital expenditure is expected to rise. The total capital expenditure of PetroChina + Sinopec + CNOOC has a year-on-year growth rate of 16.3% (the growth rate from 2020 to 2021 is – 14.2% and 8.2%), and the year-on-year growth rate of global oil and gas capital expenditure has risen to 13.6%, Benefit the company’s oil and gas explosion-proof electrical business volume; 2) the development momentum of non oil and gas business is continuing. In 2021, the company showed bright eyes in new fields such as Baijiu, nuclear power and military industry, and the trend is expected to continue in 2022.
The new base of professional lighting business has landed and started a rapid development cycle. There is a certain overlap between the downstream of professional lighting and explosion-proof appliances, and there is a certain synergy in business development. In 2020, the company’s professional lighting business revenue reached 310 million yuan. According to the statistics of Huajing Industry Research Institute, the global industrial LED lighting industry market in 2020 was US $12.5 billion, with a compound growth rate of 29.1% from 2014 to 2020. From the perspective of the Chinese market, the output value of led industrial lighting equipment reached 48.3 billion yuan in 2020, with a compound growth rate of 18.8% from 2014 to 2020. The company has introduced the business developer model into the field of professional lighting. After running in and Optimization in the last 2-3 years, the channel construction has entered the harvest period. At the same time, the completion of the company’s new Nanxun base has improved the quality of hardware facilities and the level of production automation and management informatization. The problem that many large equipment cannot enter the site due to site restrictions has also been solved. The expansion of product line can enable Huarong lighting products to meet the needs of more application scenarios.
The implementation of safety engineering intelligent system has changed from manufacturer to service provider. In 2019, the company independently developed and owned the “software + transmission + perception” safety work intelligent management and control system (SCS) with complete intellectual property rights, which integrates all-weather intelligent safety management functions such as security, command, dispatching and monitoring, and can be continuously expanded and compatible. SCS safety engineering intelligent system marks the company’s transformation from manufacturer to service provider, and the growth space is further opened. At present, the system has been applied in more than ten customers such as Zhenhai Refining and chemical, Sinopec Shanghai Petrochemical Company Limited(600688) , Shenhua Ningmei and so on. The user feedback effect is good. This business model of platform + terminal products will bring new business increment to the company and greatly improve customer stickiness.
Investment suggestion: considering the boom cycle of explosion-proof electrical appliance industry and the rapid development stage of the company’s professional lighting business, it is estimated that the net profit attributable to the parent company from 2021 to 2023 will be 360 / 460 / 620 million yuan respectively, and the corresponding valuation will be 20x / 15x / 11x respectively. It will be covered for the first time and given a “recommended” rating.
Risk tips: 1 The risk of the epidemic affecting China’s demand; 2. Increased competition in the field of professional lighting leads to the risk of average price decline; 3. Risk of decline in gross profit margin due to the continuous rise of raw materials; 4. Risk of disturbing overseas demand such as epidemic situation.
