\u3000\u3 Guocheng Mining Co.Ltd(000688) 080 Beijing Inhand Networks Technology Co.Ltd(688080) )
Event: the company released 2021 annual report and 2022 first quarter report.
In 2021, the company achieved a revenue of 450 million yuan, a year-on-year increase of 44.6%, and a net profit attributable to the parent company of 105 million yuan, a year-on-year increase of 159.7%. After deducting the non recurring gains and losses such as the investment income of ecoer, the net profit attributable to the parent company was 71 million yuan, a year-on-year increase of 119.7%, which was at the upper limit of performance forecast. In the first quarter of 2022, the company achieved a revenue of 61 million yuan, a year-on-year increase of 15.3%, and a net profit attributable to the parent company of 1.965 million yuan, a year-on-year decrease of 20.1%, and a year-on-year decrease of 64.3% after deduction, which was lower than the market expectation, mainly due to the amortization of share based payment expenses, the impact of the epidemic on delivery and delivery, and the delay of bidding for some power grid projects. The first quarter is usually the off-season for business. With the easing of the epidemic in China, we think the performance in the second half of the year may be better.
The three product lines have broad market space, and the company continues to do deep and thorough work.
The company focuses on five business segments: Industrial IOT, digital energy, smart commerce, enterprise network, vehicle and transportation, and forms three product lines: industrial communication, intelligent distribution network iwos and intelligent vending industrial computer. Among them, industrial communication is the company’s traditional advantageous product. Distribution network iwos and intelligent vending industrial computer are the two major applications successfully expanded by the company.
1) in terms of industrial communication product line, the company achieved a revenue of 218 million yuan in 2021, with a year-on-year increase of 37.6%. In 2021, the company continued to upgrade and improve the industrial router product line, covering different demand scenarios of high, medium and low, and continued to make breakthroughs in overseas markets. In 2021, the overseas revenue increased by 59.5% year-on-year, mainly contributing to industrial communication products. According to IHS’s prediction, from 2018 to 2023, the global industrial communication market will grow to US $5.5 billion with a CAGR of 16%, of which the growth rate of the company’s main product industrial router is 13%. The company’s strategy of moving from domestic substitution to key customers and continuously opening the overseas market with high cost performance is expected to exceed the industry average in the future. In addition, the compound growth rate of the industrial gateway market with edge computing capacity is as high as 38%, which is expected to reach US $280 million in 2023. The company continues to upgrade and improve the edge computing gateway product line, adds multiple models of PLC data acquisition protocols, adds quickfaas functions, expands northbound access protocols, and achieves rapid revenue growth.
2) in terms of intelligent distribution network condition monitoring products, the company achieved a revenue of 99 million yuan in 2021, with a year-on-year increase of 19.2%. At present, China has a distribution network of 4.65 million kilometers. According to the design and deployment of iwos every 2 kilometers, the market space may reach 2 million sets, close to 10 billion yuan. We calculate that the current penetration rate is only 20%. During the 14th Five Year Plan period, China Southern Power Grid plans to invest 320 billion yuan on the distribution network side, mainly focusing on the intelligent construction of distribution network, while the State Grid also plans to invest 350 billion US dollars to promote the transformation and upgrading of power grid in the next five years. We believe that the short-term impact of the epidemic will not change the prosperity of the distribution network market during the 14th Five Year Plan period. The company’s iwos products have obvious advantages in technical indicators, and adaia algorithm breaks through the multi provincial cloud deployment of the State Grid, which is expected to drive greater equipment sales and achieve higher than the average growth of the industry.
3) in terms of intelligent vending industrial control computers, the company achieved a revenue of 73 million in 2021, with a significant year-on-year increase of 109%, mainly due to the continuous large volume of large customers and the transformation of face brushing and payment of existing equipment. At present, the per capita ownership of self-service vending machines in China is only 7000 people / set, which has a lot of penetration space compared with developed countries. Overseas, the stock of self-service vending machines in Europe, America and Japan alone has reached 16 million. With the penetration of mobile payment, the popularity of video advertising and the rise of AI shopping guide, there is a strong demand for intelligent transformation, and the company will continue to expand the overseas market.
Continue to strengthen marketing and channel construction, and the sales strength of “product” companies has been enhanced.
From the perspective of market strategy, the company used to focus on key customer strategy, positioning high-end brands, covering international well-known customers such as state grid, South grid, Ge, Schneider, Philips, Rockwell, Coca Cola, Aucma Co.Ltd(600336) , nongnongshan spring and so on. Since 2021, the company has strengthened the construction of sales team, adopted equity incentive and other incentive measures to optimize sales personnel, and achieved preliminary results in the expansion of sales capacity. The company has established overseas subsidiaries in the United States and Canada and German Sun company. Last year, the overseas revenue increased by 59.5% year-on-year. We believe that the company is expected to achieve greater gains in a broader overseas market with excellent product strength, cost-effective advantages and endorsement of key customers. In addition, for the long tail market and small and medium-sized customers, the company developed dealers and integrator partners. Last year, the income of dealers increased by 69.9% year-on-year, accounting for 20%. In addition, the company continues to promote digital marketing, continue to build e-commerce platforms at home and abroad, reduce sales promotion costs and gradually improve brand awareness.
For the future layout of new products, ground cable distribution monitoring and AI self-service retail solutions create new growth points.
China has the longest distribution network line in the world, including not only overhead lines, but also a large number of ground cables in urban areas, which brings challenges to intelligent operation and maintenance. The company has developed cable line fault monitoring terminals and sensors suitable for distribution network line substations, ring network cabinets and branch boxes. At present, they have been shipped in small quantities in some pilot projects, which is expected to open a new market of distribution network during the 14th Five Year Plan period. Benefiting from the development of unmanned economy, unmanned retail devices other than self-service vending machines are blooming everywhere. With the accelerated launch of fashion beverage manufacturers such as Yuanqi forest and Dongpeng special drink, intelligent freezers and dining cabinets with AI self-service checkout payment and supply chain management capabilities are favored Beijing Inhand Networks Technology Co.Ltd(688080) has released a series of LTE industrial computers and all-in-one machines for power exchange cabinets, meal taking cabinets and intelligent freezers, introducing AI commodity identification capability and supporting intelligent cargo channel configuration. There is a huge space for intelligent transformation of 5 million freezers in China.
Investment advice
We believe that the growth rate of the parent company’s net profit in the first half of 2021 / 2022 is 1.93 billion yuan, which is expected to be affected by the repeated decline of the parent company’s net profit before 2021 / 2022, respectively. Excluding the impact of share based payment and ecoer’s statement last year, the net profit growth in 2022 is still expected to reach 40%. At present, the adjustment is sufficient. The current share price corresponding to 20222023pe is 16.8/12.4 respectively, maintaining the “buy” rating.
Risk tips
The epidemic situation in China has repeatedly affected product delivery, the investment in distribution network is lower than expected, the expansion of overseas market does not meet expectations, and the expansion of intelligent freezer market does not meet expectations.
