\u3000\u3 Guocheng Mining Co.Ltd(000688) 777 Zhejiang Supcon Technology Co.Ltd(688777) )
Event: Zhejiang Supcon Technology Co.Ltd(688777) released the annual report of 2021, and the company achieved a revenue of 4.519 billion yuan in 2021, a year-on-year increase of 43.08%; The net profit attributable to the parent company was 582 million yuan, a year-on-year increase of 37.42%; Net profit deducted from non parent company was 449 million yuan, with a year-on-year increase of 38.36%. The performance is in line with market expectations.
Key investment points
The company’s operating expenses and management expenses increased by 486.3% year-on-year, which resulted in a significant increase in the company’s operating expenses and a significant decrease in the company’s management efficiency by 18.3% PCT / year-on-year, respectively. The company’s operating cash flow in 2021 decreased by 79.80% year-on-year, mainly due to the company’s increase in inventory to ensure the safety of the supply chain. The gross profit margin of the company’s main business in 2021 was 39.3%, a decrease of 5.60pct compared with the same period in 2020, mainly due to the increase in the number of large projects during the reporting period. With Zhejiang Supcon Technology Co.Ltd(688777) constantly breaking through key customers, the proportion of large projects with more than 10 million yuan has gradually increased, and it is normal for the gross profit margin to decline. We should pay more attention to the incremental market space and rapid growth of performance brought by breaking through key customers.
The proportion of industrial software revenue has gradually increased, and the overseas business expansion has been fruitful: from the perspective of business, the revenue of industrial automation and intelligent manufacturing solutions in 2021 was 3.258 billion yuan, an increase of 39.83% year-on-year; The revenue of instruments and meters was 516 million yuan, a year-on-year increase of 44.16%; The revenue of industrial software was 356 million yuan, a year-on-year increase of 35.86%; The revenue of operation and maintenance services was 204 million yuan, a year-on-year increase of 87.67%; The business revenue of S2B platform was 129 million yuan, with a year-on-year increase of 206.71%. In 2021, industrial software (including separate industrial software business and industrial software in industrial automation and intelligent manufacturing solutions) accounted for 19.39% of the main business income, with a year-on-year increase of 2.38pct. The company will focus on developing industrial software business in the future, and the proportion of industrial software will further increase, becoming an important growth pole of the company’s business. Significant progress was made in overseas business. The company’s overseas business achieved a revenue of 184 million yuan, an increase of 53.8% year-on-year. It successfully entered the list of qualified suppliers of BASF and realized the formal application of DCS in its production units; Listed as a key cooperative manufacturer by Saudi Aramco.
The downstream high-profile superimposed industrial software localization policy is overweight, and central control is expected to usher in rapid development: according to the annual report of 60 Tianjin Guifaxiang 18Th Street Mahua Food Co.Ltd(002820) 21, the China Petroleum & Chemical Corporation(600028) planned capital expenditure in 2022 is RMB 19.8 billion, with a year-on-year increase of 18%, the highest annual capital expenditure since 2013.
Profit forecast and investment rating: Zhejiang Supcon Technology Co.Ltd(688777) products have leading performance, strong downstream demand and policy support. We believe that Zhejiang Supcon Technology Co.Ltd(688777) is expected to accelerate its development. However, due to the company’s continuous expansion of key customers, the proportion of revenue from large projects will gradually increase in the future, and the gross profit margin may continue to be under pressure. We reduced the net profit attributable to the parent company from 2022 to 2023 to 739 (- 0.95) / 922 (- 123) million yuan, and expected the net profit attributable to the parent company to be 1.156 billion yuan in 2024, maintaining the “buy” rating.
Risk warning: the actual capital expenditure of downstream industries is lower than expected; The aggravation of the epidemic affects the expansion of overseas markets; The progress of product research and development is less than expected.
