\u3000\u3 Guocheng Mining Co.Ltd(000688) 777 Zhejiang Supcon Technology Co.Ltd(688777) )
Event overview
Zhejiang Supcon Technology Co.Ltd(688777) issued the 2021 annual report on April 11. In 2021, the company achieved an operating revenue of 4.519 billion yuan, 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 bright, and the market share of products is increasing
On the revenue side, the company achieved an operating revenue of 4.5 billion yuan in 2021, a year-on-year increase of 43%. By business: 1) industrial automation and intelligent manufacturing solutions are still the main source of the company’s revenue, with an operating revenue of 3.3 billion yuan in 2021. Among them, the market share of DCS in China reached 33.8%, with a year-on-year increase of 5.3pct; The market share of safety instrument system in China reached 25.7%, with a year-on-year increase of 3.3pct; 2) The breakthrough of industrial software business was accelerated, and the annual revenue was 870 million yuan, with a year-on-year increase of 63.4%. The market share in China reached 28.6%, with a year-on-year increase of 1.6pct. From the perspective of the downstream industry, the revenue of the power and petrochemical companies is still 1.57 billion yuan, accounting for 25.7% of the total revenue of the downstream industry; The pharmaceutical and food industry grew rapidly, with an income of 310 million yuan, a year-on-year increase of 67.3%. On the profit side, the company realized a net profit attributable to the parent company of 580 million yuan in 2021, with a year-on-year increase of 37.4%. The gross profit margin was 39.3%, with a year-on-year decrease of 6.3pct, mainly due to the increase in the proportion of large customers and large orders.
Large orders continue to land and overseas markets continue to expand
In terms of Chinese customers, in 2021, the company continued to expand its 5S stores, 29 small stores were upgraded to medium and large stores, the number of medium and large stores increased from 39 to 68, and the number of single stores with an income of more than 50 million yuan increased from 16 to 33. Thus, the company continued to break through major customers and landing large orders, established strategic cooperation with head customers such as zheneng group and China Coal Group, and achieved a year-on-year increase of 95% in the contract amount of large projects of more than 10 million. Overseas, the company continued to explore overseas markets, established Singapore International Operation Center, gradually expanded to Southeast Asia, the Middle East, Africa and other places, and successfully entered the list of qualified suppliers of BASF. The operating income of overseas business increased from 120 million yuan in 2020 to 180 million yuan in 2021, with a year-on-year increase of 53.8%. We believe that the continuous breakthrough of the company’s key customers is another verification of the company’s technology and sales ability. The company is expected to build benchmark projects, continue to expand brand effect and realize performance growth.
There is a strong demand for automation control in process industry, and there is a wide space for import substitution
On the one hand, the 14th five year plan for the integrated development of informatization and industrialization proposes to continue to promote the digital transformation of the industry and promote the integration of production control in petrochemical, chemical, energy and other major process industries. According to the statistics of the integration service platform of the Ministry of industry and information technology, the readiness rate of enterprise intelligent manufacturing in the fourth quarter of 2021 was only 11.3%. Therefore, there is a strong demand for automation transformation in petrochemical, chemical, electric power and other process industries. On the other hand, the supply capacity of Chinese enterprises in the automation instrument industry is limited, the medium and high-end market is dominated by large foreign enterprises, and there is a huge space for domestic substitution. Zhejiang Supcon Technology Co.Ltd(688777) is a high-quality target with the attributes of industrial software, domestic substitution, intelligent manufacturing and scientific and technological innovation. It has three major premiums: the certainty of leading product competitiveness, the scarcity of the only one in the Chinese market, and the high prosperity of downstream petrochemical and chemical industries, electric power and other industries. In the long run, it has great growth space
Investment advice
Zhejiang Supcon Technology Co.Ltd(688777) is a leading enterprise in process industry products and solutions. The company grasps industry opportunities, constantly breaks through key customers and actively expands overseas markets. We expect the company to achieve revenue of 6.1/81/10.8 billion yuan from 2022 to 2024, with a year-on-year increase of 34% / 33% / 35%; The net profit attributable to the parent company was RMB 780 / 10.2 / 1.4 billion, with a year-on-year increase of 34% / 32% / 37%, maintaining the “buy” rating.
Risk tips
1) the downstream demand is lower than expected; 2) R & D breakthrough is less than expected; 3) Market expansion was less than expected.
