\u3000\u3 Shengda Resources Co.Ltd(000603) 556 Hexing Electrical Co.Ltd(603556) )
Key investment points
The management improvement cost of the leading enterprises in the global technological innovation of electricity meters has decreased rapidly
The company is a new power system solution provider with global layout. Its main products are intelligent power products, intelligent distribution products and new energy products. In 2021, the company achieved a revenue of 2.691 billion yuan, a year-on-year decrease of 4.1%, and the net profit attributable to the parent company was 314 million yuan, a year-on-year decrease of 34.7%. The decline in performance was mainly affected by the epidemic, the decline of overseas revenue, the appreciation of RMB and the rise of raw material costs. The cost of management improvement decreased rapidly, and the marketing cost decreased by 32.9% year-on-year in 2021. The company's 21q4 performance began to improve. The 22q1 performance reached the highest level in the first quarter of the calendar year since 2016, and the net profit attributable to the parent company reached 140 million yuan, with a year-on-year increase of 211.97%.
China: usher in a new round of replacement cycle, and the new standard improves the value of single table
China's electricity meters will usher in a new round of replacement cycle. The value of the new generation of smart meters of China Southern Power Grid and the Internet of things meters under the ir46 standard will increase. The average unit price of the new meters will rise by more than 30% in 2021, and the electricity meter industry will enter the stage of simultaneous rise in volume and price. It is estimated that by 2024, the total space of China's smart meter industry will be nearly 35.26 billion yuan, and the CAGR in 20212024 will be 18.7%. At present, the management core technology of the company's new watch is in the leading position in the industry. In the future, it will also benefit from the upward space of the industry and the increase of market share.
Overseas: by virtue of the ability of system solution, the competitiveness of China has caught up with Europe and the United States, and the short-term export business has benefited from the appreciation of foreign currency
The company is the earliest and largest export enterprise of China's independent brand smart meter products, with products covering more than 90 countries and regions around the world. In view of the different phased needs and pain points of overseas customers for the power system, it provides a complete set of solutions for intelligent power consumption from system to communication to terminal, obtains significant competitive advantages in markets outside Europe and the United States, such as Brazil, Indonesia and Vietnam, and is the largest supplier of smart meters in Brazil. In 2021, the overseas revenue was 1.627 billion yuan, accounting for 61.2% of the revenue, and the export business accounted for a high proportion. It is expected to benefit from the appreciation of foreign currency in the short term.
Distribution and new energy businesses benefit from the traction of industrial policies, and their future performance is more flexible
The distribution and new energy businesses benefit from the rapid development of the industry. During the "14th five year plan" period, the investment scale of intelligent distribution is expected to be as high as 1.5 trillion yuan. The company established the distribution network division in 2015 and continued to cultivate the distribution network automation equipment. At present, it has reserved products such as primary and secondary fusion column circuit breaker / ring network cabinet (box), distribution terminal FTU / DTU / TTU, which are mainly sold to the State Grid, and will continue to develop the business of the South Grid in the future. Through resource integration and independent development and layout of distributed energy business, the company has the independent and controllable ability of distributed energy core equipment such as inverter, energy storage battery and Microgrid control system. The new energy business is expected to maintain rapid growth in the future.
Profit forecast and valuation
The company is a leading global new power system service provider, benefiting from China's new round of meter replacement cycle and the acceleration of distribution network construction, and short-term export business benefiting from the appreciation of foreign currency. We expect that the company will realize net profit attributable to the parent company of 521 million yuan, 640 million yuan and 779 million yuan from 2022 to 2024; The corresponding EPS is 1.07, 1.31 and 1.59 yuan / share, and the corresponding PE is 14, 11 and 9 times. With reference to the valuation of comparable companies, we valued the company at 18x in 2022, with a target market value of 9.4 billion yuan and maintained a "buy" rating.
Risk warning: the risk that the demand for smart meters is less than expected; Risk of price fluctuation of raw materials; Risk of exchange rate fluctuations.
