\u3000\u3000 Jiangsu Hengli Hydraulic Co.Ltd(601100) (601100)
Event: on 01 2022, 7, the official account of Jiangsu Hengli Hydraulic Co.Ltd(601100) announced that the company reached strategic cooperation with Edwards to provide vacuum pump castings.
Key investment points
Supply Edwards vacuum pump castings, a global leader, which is expected to contribute hundreds of millions of yuan in annual revenue
Edwards is a global leader in vacuum pumps. It has been established for more than 100 years in 1919. Its business covered 75 countries in 1975 and was acquired by atlas in 2014. According to Jiangsu Hengli Hydraulic Co.Ltd(601100) official account, Edwards has a global share of 95% in semiconductor vacuum pumps, and the global share of vacuum pumps in lithium batteries, photovoltaic and pharmaceutical fields is 70%. In 2014, Edwards' revenue was about £ 700 million. According to the calculation that castings account for 10% - 20% of the value of vacuum pump, the annual casting procurement of Edwards vacuum pump castings is about 500-2 billion yuan. With the deepening cooperation between Hengli and Edwards, we expect that the single Edwards vacuum pump casting business is expected to contribute hundreds of millions of yuan to Hengli's annual revenue in the future.
Cut into semiconductor, new energy and pharmaceutical industries and make breakthroughs in diversification strategy
According to isvt, in 2019, the global market scale of vacuum pumps was about 35 billion yuan, of which vacuum equipment for semiconductors was about 13.5 billion yuan, accounting for 38%, which was the largest application field. In terms of Edwards' revenue structure, semiconductor vacuum pumps accounted for 37.3% of revenue in 2012, which is basically consistent with the industry. In addition, the revenue of general vacuum pumps, vacuum pumps in emerging fields and services accounted for 28.4%, 7.0% and 27.3% respectively. Edwards semiconductor customers include wafer factories and semiconductor equipment factories. From 2010 to 2012, the company's largest customer was Samsung, accounting for 15.1%, 13.6% and 13.4% of revenue respectively. This cooperation demonstrates Hengli's excellent casting technology and lays a foundation for the company to enter the semiconductor, new energy and pharmaceutical industries.
Transformed into a general-purpose core parts company with attractive valuation
According to our previous in-depth report, in 2020, China's excavator hydraulic parts market will be about 20 billion yuan, and the non excavation hydraulic parts market will be about three times that of the excavator field (60 billion yuan). In 2020, the revenue of Hengli non excavation oil cylinder + non excavation pump valve will be only 1.6 billion yuan, the penetration rate is very low, and the long-term development prospect is considerable. Benchmarking with Rexroth, the global leader of platform hydraulic parts, Hengli has transformed from a special excavator to a general core parts company, entered the field of general hydraulic parts three times that of excavator hydraulic parts, and opened the second growth curve. We expect that in the future, a single new product of the company is expected to contribute hundreds of millions of yuan of annual revenue, with rich categories and accelerated launch of new products. Compared with comparable companies of general equipment and parts, Hengli's valuation has been very attractive.
Profit forecast and investment rating: the company is the leader in the scarcity of domestic high-end hydraulic parts, has the ability to expand the platform of products, expand the general field and open the second growth curve. We maintain the company's net profit attributable to the parent company of RMB 2.7/35/4.5 billion from 2021 to 2023, the current market value corresponding to PE is 43 / 33 / 26x, and maintain the "buy" rating.
Risk warning: macroeconomic downside risk; The expansion of non excavation business was less than expected, and the excavator industry fluctuated sharply.
