\u3000\u3 Guocheng Mining Co.Ltd(000688) 777 Zhejiang Supcon Technology Co.Ltd(688777) )
Event overview
On April 12, Zhejiang Supcon Technology Co.Ltd(688777) released its 2021 annual report, which realized an annual operating revenue of 4.519 billion yuan, a year-on-year increase of 43.08%, and a net profit attributable to the parent company of 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 overall performance of the company is in line with the express level previously disclosed. The three internal and external growth engines have driven the overall and substantial acceleration of core business, exceeding the growth expectations of the market for the company and the industry.
Intelligent manufacturing has great room for improvement, and the demand for digital transformation of manufacturing industry is strong and continuous
1) at present, the maturity level of China’s intelligent manufacturing capacity is still low, and there is much room to improve the overall development level of industrial automation, industrial software technology application and intelligent manufacturing. 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%, and most manufacturing enterprises were still in the basic automation stage, resulting in insufficient information and data sources of industrial production, which affected the application and popularization of industrial software.
2) with the current rising price of raw materials, the disappearance of labor demographic dividend and the white hot industrial competition, the demand for enterprises to improve quality, reduce cost and increase efficiency through digital transformation is becoming more and more urgent. In recent years, the supply capacity of China’s intelligent manufacturing and digital transformation has significantly lagged behind the overall scale and development growth of the manufacturing industry. The investment in automation and informatization still accounts for a very low proportion of the capital expenditure of the whole manufacturing industry and needs to be continuously strengthened. Meanwhile, various national industrial policies in the short, medium and long term are also supporting and increasing the transformation and upgrading of the manufacturing industry.
3) with the continuous improvement of industrial concentration, the number of large-scale devices and large-scale projects is increasing, which brings the service demand of large-scale projects and system level solutions. The trend of increasing industrial concentration is particularly obvious in process industries such as chemical industry, petrochemical industry and energy. The increase of industrial concentration of downstream users has driven the rapid increase of the proportion of large customers and large projects of the company. According to the disclosure of the annual report, in 2021, central control realized more than 10 million large projects, with a year-on-year increase of 95% and 1724 new customers.
The company’s product technical ability is improved, the market share is continuously expanded and the leading position is consolidated
1) in terms of control system, the company’s revenue increased by 33.2% year-on-year, significantly exceeding the 20% growth in previous years. According to the disclosure of the annual report, the market share of the company’s distributed control system (DCS) in China reached 33.8%, ranking first for 11 consecutive years. Technological R & D breakthroughs continued, and new products such as national industrial control system ecs-700x, cloud PLC control system and industrial control network security monitoring system were released one after another.
2) in terms of industrial software, the company’s revenue increased by 63.4% year-on-year, with a record growth rate. The industrial software product system has been continuously enriched, and 218 industrial app application development systems have been formed, including seven categories of industrial software systems, including real-time database, digital twins, production management, process optimization, production safety, asset management and supply chain management. In 2021, relying on the new model of “platform + industrial app”, the company released a number of subdivided products and industry solutions, which were applied in nearly 100 projects and improved rapidly.
3) in terms of technology R & D, central control invested nearly 500 million yuan in R & D in 2021, with a year-on-year increase of 37.19%. By the end of December 2021, the company has accumulated 395 authorized patents, including 83 newly authorized patents in 2021; 509 computer software copyright registrations were obtained, including 84 new software copyright registrations in 2021.
4) in terms of customer and industry expansion, according to the disclosure of the annual report, the number of process industry customers covered by the company increased from more than 21000 in 2020 to more than 23000 in 2021. In the traditional three advantageous industries, chemical, petrochemical and electric power, the revenue of central control increased by 42.32% year-on-year, and continued to maintain its leading position; Remarkable achievements were made in the cultivation of industries such as pharmaceutical, food and building materials, with a year-on-year increase of more than 60%. In addition, with the help of industrial software, the company has also expanded the application of lithium battery, food, cable, waterproof materials and other new industries.
5S store channel sinking + S2B online operation to continuously strengthen the dominance of marketing
1) 5S offline stores move the company’s sales end forward, expand the radius of industrial customer service, close to customer needs, and grasp the dynamic analysis of customer needs in real time; S2B online service platform integrates online mall, industrial SaaS, demand dispatch, Federal Reserve joint standby and knowledge training to provide online one-stop industrial services. Through 5s offline stores and S2B online service platform, the company has reduced customer inventory costs and asset depreciation rates, achieved the goal of visibility of the whole service process, concentrated marketing resources, accurately and deeply explored the needs of users at different stages, expanded the sales radiation radius, continued to focus on the medium and high-end market, and finally realized the strategic cooperation of multiple key customers and the grid full coverage management of large projects. At the same time, “5S store + S2B platform” can also timely adjust the sales strategy according to the development and changes of downstream industries, so as to effectively meet the strategic needs of market layout in key regions outside China, in-depth service for important customers and developing emerging markets. 2) The operation mode of “5S store + S2B platform” quickly responds to customers, deeply excavates the potential of core strategic customers, continues to explore new customers and markets, and effectively drives the rapid growth of the company’s business performance. In 2021, central control gradually deepened and optimized the operation of 5S stores and continuously expanded the single store scale of 5S stores. According to the annual report, last year, 29 small stores were upgraded to medium and large stores, and the number of medium and large stores increased from 39 to 68, of which the number of single stores with an income of more than 50 million yuan increased from 16 to 33. Through 5s stores in six regions in China, we have strengthened the customer interface, strengthened sales management, effectively analyzed the customer distribution and market share of subdivided industries, and achieved precision marketing. In 2021, we won the 10 million ton oil refining and 1 million ton ethylene refining and chemical integration project of Yulong petrochemical, the 5 million ton / year PTA and 2.4 million ton / year new functional fiber project of Tongkun group, the Sinopec Shanghai Petrochemical Company Limited(600688) carbon fiber project of Sinopec Shenghong Refining & Chemical ten million ton oil refining and one million ton ethylene refining & chemical integration project, Inner Mongolia Baotou Steel linkage force air compressor cluster control project, Beijing Oriental Yuhong Waterproof Technology Co.Ltd(002271) intelligent factory project.
Investment advice
Zhejiang Supcon Technology Co.Ltd(688777) is China’s leader in process industry products and solutions. It has the attributes of intelligent manufacturing, industrial software and domestic substitution, and enjoys a certain valuation premium. It is estimated that the revenue growth rate of the company from 2022 to 2024 will be 42.5% / 43.8% / 43.3% respectively, and the growth rate of net profit attributable to the parent company will be 35.4% / 36.3% / 33.6% respectively, maintaining the investment rating of buy-a. Give a 6-month target price of 79.00 yuan, equivalent to 50 times the dynamic P / E ratio in 2022.
Risk warning: the research and development of core technology is not as expected; Product promotion and industrial ecological construction were not as expected.
