\u3000\u3000 China Railway Hi-Tech Industry Corporation Limited(600528) (600528)
Key investment points
TBM is the leader of shield machine, accounting for the first place all year round
The company is the world’s largest R & D manufacturer of shield machine (for driving in soft soil and water rich strata) / TBM (for driving in hard rock), the world’s largest manufacturer of turnout and bridge steel structure, and China’s largest manufacturer of special railway construction equipment. The market share of the company in China’s shield machine / TBM field has been the first for many consecutive years, and the market share has remained above 35%; The production and sales volume has remained the first in the world for four consecutive years, forming a duopoly with China Railway Construction Heavy Industry Corporation Limited(688425) .
The proportion of tunnel construction equipment is expected to increase; Net profit attributable to parent company in the past 4 years CAGR is 8%
The company’s four main businesses: tunnel construction equipment (including shield machine / TBM, with strong profitability and gross profit accounting for nearly 40%), engineering construction machinery, turnout, steel structure manufacturing and installation and other equipment. The revenue accounts for 27% / 5% / 19% / 46% respectively in 2020. From 2017 to 2020, the compound growth rate of the company’s revenue was 11%, and the compound growth rate of net profit was 8%. The compound annual growth rate of the company’s new orders from 2018 to 2020 was 17%, and the newly signed contracts in the first half of 2021 increased by 31% year-on-year. In the past three years, the average gross profit margin / net profit margin was 20% / 8%. With the rapid growth of shield machine / TBM revenue with high gross profit margin, the optimization of product structure will improve the profitability of the company.
Steady growth: the compound growth rate of shield machine in the next three years is about 10%; Pumped storage drives new growth
1) subway construction: the downstream works of shield machine are mainly subway works, accounting for 70% – 80%. During the 14th Five Year Plan period, the operating mileage of China’s urban rail transit will increase by 3000 kilometers. At present, the total market stock of shield machines in China is about 3500 sets. According to the single machine price of 35-40 million / set, the annual new equipment scale is about 17.5-24 billion yuan. It is estimated that the demand for shield machines brought by rail transit subway construction from 2022 to 2024 will be 608, 713 and 800 respectively. It is expected that the price of single machine will show a slight downward trend, which will bring about a market space of about 21.3 billion, 25 billion and 28 billion in 2022-2024, and the compound growth rate of industry demand in the next three years will reach about 10%.
2) there are broad application prospects in emerging fields such as pumped storage, municipal pipe gallery and national defense special industries: the application of TBM expands to emerging fields such as pumped storage, railway highway tunnel (such as Sichuan Tibet Railway), municipal pipe gallery (urban underground parking lot), water conservancy and hydropower, energy coal mine and national defense special industries, driving the new growth of TBM demand. In recent years, the R & D and application of the company’s deep ploughing pumped storage TBM have filled the gap in the application of domestic TBM in the pumped storage industry and become an important force serving the national carbon peak and carbon neutralization. The company has completed or is in the process of developing and applying TBM equipment for 8 pumped storage power station projects, including Shandong Wendeng pumped storage power station and Henan Luoning pumped storage power station.
Profit forecast and valuation
It is estimated that the company’s revenue from 2021 to 2023 will be RMB 276 / / 31.8/37.2 billion respectively, with a year-on-year increase of 14% / 15% / 17%; The net profit attributable to the parent company was RMB 1.97 billion / 2.27 billion / 2.67 billion respectively, with a year-on-year increase of 8% / 16% / 17%, corresponding to 10 / 8 / 7 times of PE. For the first time, give a “buy” rating.
Risk tips
1) the growth rate of infrastructure investment such as subway slows down; 2) The development of energy storage technology iteration and pumped storage is lower than expected
