Zhejiang Supcon Technology Co.Ltd(688777) ( Zhejiang Supcon Technology Co.Ltd(688777) . SH), as the leader in the field of Intelligent Manufacturing in the process industry, recently handed over the 2021 answer sheet with a significant increase in performance growth, exceeding the consensus expectation of the market.
On April 12, Zhejiang Supcon Technology Co.Ltd(688777) released its annual report that the company achieved a year-on-year increase of 43.08% to 4.519 billion yuan in revenue and 37.42% to 582 million yuan in net profit attributable to the parent company in 2021. Compared with the year-on-year growth rate of 24.51% and 15.81% in 2020, it has increased significantly, and to a large extent exceeded the previous consensus expectation of the market. The company will also distribute a cash dividend of 3.60 yuan (including tax) for every 10 shares to all shareholders.
Behind the acceleration of performance growth is that under the background of digital transformation and upgrading in China’s process industry and strong demand from downstream customers, Zhejiang Supcon Technology Co.Ltd(688777) with the advantages of leading technology and leading scale, as well as the new Wuxi Online Offline Communication Information Technology Co.Ltd(300959) service model of 5S automatic housekeeper and S2B platform, it has broken through multiple leading large customers and continuously increased the customer coverage of process industry.
At present, the company is expanding its competitive advantage through technology R & D investment and M & A, and has a solid foundation for rapid development in the future of high prosperity in intelligent manufacturing, domestic substitution and “double carbon” policy catalytic industry. According to the company’s performance forecast for the first quarter of 2022, the company’s net profit attributable to the parent company will increase by 31.30% – 56.99% year-on-year, and the year-on-year growth rate of net profit deducting non attributable to the parent company will increase to 70.07% – 104.08%. The high growth trend of performance is further confirmed.
01. Business explosion
profit growth welcomes substantial acceleration
Since its establishment in 1999, Zhejiang Supcon Technology Co.Ltd(688777) has been deeply engaged in the field of process industry. From the independent research and development of distributed control system (DCS), has gradually moved towards the medium and high-end market and gradually realized the substitution of domestic products.
At present, the company has become a leader in the field of process industrial control in China, and has formed a series of industrial automation products based on automatic control system, including instruments and meters. With the automatic control system business including DCS system, SIS system and networked hybrid control system, plus various automatic instruments, Zhejiang Supcon Technology Co.Ltd(688777) can cover the production automation needs of process industry.
At the same time, the company complies with the development trend of industry 4.0. In order to continuously help users improve their digital and intelligent operation and management level, based on the accumulation of industry knowledge for many years, the company has vigorously developed an industrial software product system dominated by MES, APC, OTs and RTDB to layout the industry solution business. In addition, the company also strengthened localized operation and maintenance services and built a relatively perfect “industry 3.0 + 4.0” product and solution architecture system.
Zhejiang Supcon Technology Co.Ltd(688777) is making steady progress from automation product supplier to intelligent manufacturing overall solution supplier serving the process industry.
In 2021, Zhejiang Supcon Technology Co.Ltd(688777) business ushered in an all-round outbreak, driving a significant acceleration of performance growth.
According to the announcement data, firstly, in the field of automatic control system, Zhejiang Supcon Technology Co.Ltd(688777) in the market environment of rapid growth of China’s market scale, on the basis of leading scale, continue to expand the market share of advantageous product industrial automatic control system. Not only in petrochemical, chemical and other advantageous fields, but also in pharmaceutical, food, building materials, electric power and other industries.
At the same time, in the process of increasing the popularity of intelligent manufacturing and continuously promoting the growth of industrial software market demand, the company continued to cultivate its advantageous product automation control system (“industry 3.0”), continuously improved the product pedigree of automation instruments (“industry 3.0”), and vigorously developed the business of industrial software (“industry 4.0”), which enabled the overall solution business of industrial software and intelligent manufacturing to maintain rapid growth.
In addition, the company has also established a marketing service network centered on the enterprises in the park, arranged offline 5S stores around the National Chemical Park, and built a plant mate online platform to accurately analyze the market and competitive trends. Through the new Wuxi Online Offline Communication Information Technology Co.Ltd(300959) service mode of 5S automatic housekeeper and S2B platform, the company has achieved an increase in the customer coverage of process industry. At the same time, with its technical ability and brand advantages, the company has broken through multiple leading large customers, and the proportion of large projects is increasing. In the Chinese market, the contract amount of large projects with more than 10 million yuan increased by 95% year-on-year, and 1724 new customers were added.
In this context, the company’s industrial automation and intelligent manufacturing solutions, instruments and meters, industrial software, operation and maintenance services and S2B platform business increased by 39.83%, 44.16%, 35.86%, 87.67% and 206.71% year-on-year to 3.258 billion yuan, 516 million yuan, 356 million yuan, 204 million yuan and 129 million yuan respectively, all achieving significant growth, driving the total revenue scale to increase by 43.08% year-on-year to 4.519 billion yuan.
Transmitted to the profit side, the optimization of the company’s expense rate further raised the net profit performance.
According to the data, in addition to the high year-on-year growth of 37.19% in R & D investment affecting long-term development, Zhejiang Supcon Technology Co.Ltd(688777) sales expenses, management expenses and financial expenses changed by 16%, 7.63% and – 187.85% respectively year-on-year, which were significantly lower than the growth of revenue. The overall expense rate decreased from 35.26% in 2020 to 29.24% in 2021.
Figure / company annual report
Finally, the net profit attributable to the parent company in 2021 was 582 million yuan, a year-on-year increase of 37.42%, which was significantly higher than 15.8% in 2020.
Looking forward to the future, the high outlook in many fields and domestic substitution opportunities will continue to provide Zhejiang Supcon Technology Co.Ltd(688777) with the cornerstone of performance growth.
02. Domestic substitution superimposed by industry uplink
solid cornerstone of performance growth
At present, both DCS and industrial software maintain a considerable growth trend.
Firstly, in terms of distributed control system (DCS), DCS, known as “industrial brain”, is composed of input and output module, communication module, controller and man-machine interface. In essence, it uses computer technology to collect, control and monitor the production process. It is mainly used in the fields of chemical industry, petrochemical industry, electric power, metallurgy and other process industries.
At present, the scale of China’s DCS market is growing steadily, leading the world. According to the data of reportlinker, the global DCS market scale is expected to be about US $16.9 billion in 2020, of which the process industry accounts for more than 60%. From 2020 to 2027, the global market CAGR is about 3.5%, and the market scale is expected to reach US $21.5 billion in 2027.
According to the prediction of Rui industry, China’s DCS market will maintain stable growth from 2022 to 2027, with a compound growth rate of 5-6%, higher than the growth rate of the global DCS market.
In the field of industrial software, although China’s industrial software market started a little late, it has a strong development momentum and is in the stage of rapid development. In 2019, the scale of China’s industrial software market reached 172 billion yuan, a year-on-year increase of 16.45%. From 2012 to 2020, the compound growth rate of China’s industrial software market was as high as 20.34%, higher than that of the global market.
In the future, driven by policies, the field of industrial software is expected to usher in an accelerated growth. In the action plan for reaching the carbon peak before 2030 issued by the State Council, it is proposed to implement energy conservation and carbon reduction projects in key industries and promote energy conservation and carbon reduction in electric power, steel, non-ferrous metals, building materials, petrochemical and chemical industries.
The development plan of software and information technology service industry in the 14th five year plan of the Ministry of industry and information technology also proposes to supplement the short board of industrial control software. As can be seen in the 14th five year plan for intelligent manufacturing development, by 2025, 70% of manufacturing enterprises above designated size are expected to basically realize digital networking, more than 500 intelligent manufacturing demonstration plants are expected to be completed, and the market satisfaction rates of intelligent manufacturing equipment and industrial software are expected to exceed 70% and 50% respectively.
Domestic enterprises will continue to enjoy such opportunities as domestic enterprises.
Previously, China’s high-end automation market was dominated by overseas giants, but local brands emerged excellent companies like Zhejiang Supcon Technology Co.Ltd(688777) through differentiated competition, occupying advantages in some segments, gradually breaking the monopoly of foreign capital, and gradually increasing the market share of local brands.
In 2021, the market share of Zhejiang Supcon Technology Co.Ltd(688777) distributed control system (DCS), the industry leader, in China reached 33.8%, an increase of 5.3 percentage points over 2020, and ranked first in China’s DCS market share for 11 consecutive years.
Among them, the market share of the company in the chemical industry reached 51.1% in 2021, 6.9 percentage points higher than that in 2020; In 2021, the company’s market share in the petrochemical field reached 41.6%, 7.6 percentage points higher than that in 2020; In 2021, the market share of the company in the field of building materials reached 29.0%, 1.9 percentage points higher than that in 2020, ranking first in the three industries, and reaching the international advanced level in terms of reliability, stability and availability.
According to the statistics of China industrial control network, the Chinese market share of the company’s core product safety instrument system (SIS) in 2021 was 25.7%, 3.3 percentage points higher than that in 2020, ranking second; Among them, it ranks first in the market share of the chemical industry. The market share of the company, both as a whole and in subdivided fields, is steadily increasing.
In addition, the company’s increased investment in technology and the synergy of M & A will further enhance the company’s competitiveness.
03, high investment, acquisition and acquisition blessing
competitive advantage continues to increase
R & D investment has been increasing, and Zhejiang Supcon Technology Co.Ltd(688777) leading edge continues to expand.
Adhering to the Zhejiang Supcon Technology Co.Ltd(688777) , independent innovation, starting from realizing the domestic substitution of DCS, the company has continuously invested in technology research and development and the construction of R & D platform, formed three technical platforms of control system, industrial software and automation instrument, as well as eight core technologies such as high reliability design technology of thermal redundancy of control system, and constructed distributed control system, safety instrument system, networked hybrid control system Five core product lines such as industrial software and automatic instruments, as well as intelligent manufacturing solutions with automatic control system as the core.
In 2021, the company closely followed the development trend of global industrial software and digital technology, continuously upgraded the industrial 3.0 product pedigree, enriched the industrial 4.0 product pedigree, and integrated five technical fields such as Pt (process technology) + ET (equipment technology) + ot (operation technology) + at (Automation Technology) + it (Information Technology).
According to the annual report, the company’s R & D expenses reached 497 million yuan in 2021, an increase of 37.19% over the same period last year. The company has also released a series of new safety monitoring systems, such as the ecs-700s-500 cloud control system and the tcs-500 volume control system. And vigorously develop industrial apps. At present, it has seven types of industrial software systems, including real-time database, digital twins, production management, process optimization, production safety, asset management and supply chain management, with a total of 218 industrial app application development.
Moreover, the recent strategic acquisition will also complement each other’s advantages and help the company achieve a breakthrough in industrial software.
On February 24, 2022, the company announced that it would acquire 22% equity of PCCW with cash of RMB 561 million. Statistics show that based on industrial software, PCCW has a deep knowledge-how accumulation in the informatization of energy industries such as petroleum, chemical industry and oil and gas. It has continuously cultivated the operation digital solutions and it services represented by ERP for many years, and its business covers the whole industrial chain of upstream, middle and downstream.
Figure / company announcement
After the completion of this transaction, central control will cooperate with PCCW in technology and market innovation and resource integration, integrate into each other’s supply chain system, and then form an overall solution of intelligent factory covering the whole industry chain to meet the systematic needs of large customers in the process industry. In addition, PCCW’s technical capability and project experience in enterprise informatization are expected to help further break through the central control industrial software business and realize the full product line coverage from production control level to operation management level.
At present, with the support of multiple advantages such as technology and scale, the effectiveness of the company’s service ecological construction will gradually appear. In the future of high prosperity in the industry catalyzed by intelligent manufacturing, domestic substitution and “double carbon” policy, Zhejiang Supcon Technology Co.Ltd(688777) is expected to maintain the performance growth trend. In the latest quarterly performance forecast, the year-on-year growth rate of the company’s net profit deducted from non parent company is expected to increase to 70.07% – 104.08%, which further verifies the Growth Logic of Zhejiang Supcon Technology Co.Ltd(688777) .
