(Report Producer/Author: Minsheng Securities, Li Zhe, Luo Song)
1 Basic situation: digital printing faucet, equipment + ink dual drive
1.1 Focus on the market for 30 years, equipment + ink dual main business
Founded in 1992, starting with textile CAD/CAM, the company has been deeply engaged in the field of digital printing for nearly 30 years, forming a density curve optimization technology based on machine learning, the applicability optimization and expansion technology based on color management specifications (ICC), color management engine, super capacity data crowd core parallel processing technology, precision electromechanical control system, nano ink formula and other core technologies, is a digital printing technology as the core, focus, digital printing industrial applications, set pre-sale consultation, in-sale debugging, After-sales service and software support in one of the textile digital printing integrated solution provider, the company through the provision of digital printing integration solutions to provide customers with digital printing to realize the application of equipment, consumables promotion, the main products for digital direct printing machine, digital inkjet transfer printing machine, ultra-high speed industrial printing machine and ink.
1.2 The actual controller holds 26.39% of the shares, and the equity incentives of the core members are in place
The company's equity structure is stable, and the actual controller Jin Xiaotuan indirectly holds 26.39% of the company's equity through Ningbo Weixin, Chibo Company and Baoxin Digital. Jin Xiaotuan, the actual controller, is a professor-level senior engineer with a technical background, and has served as the chairman and general manager of Honghua Digital since October 2016, and is now also the executive director of Baoxin Digital and Chibo Company. The six core members of the company hold the shareholding platform of Chibo Company, the core members hold 17.91% of the shares of Chibo Company, and Chibo Company holds 12.49% of the equity of listed companies.
1.3 Revenue CAGR=35.1% and Attributable Net Profit CAGR=43.0% in 2017-2021
From 2017 to 2021, the company's revenue growth rate CAGR = 35.1%, 2021 revenue reached 940 million yuan, an increase of 31.74% year-on-year; attributable net profit increased from 0.54 billion yuan in 2017 to 227 million yuan in 2021, CAGR = 43.0%, an increase of 32.4% year-on-year in 2021. 2021 operating results and attributable net profit increased rapidly compared with the same period of the previous year, mainly due to the impact of the epidemic in the previous year, resulting in a relatively low amount in the same period of the previous year, on the basis of the domestic epidemic situation is well controlled, the company's business in 2021 quickly recovered.
From 2009 to 2021, the company's gross profit margin remained basically stable at 38.4%-45.3%, and the net profit margin was 16.7%-24.4%, overall, the company's sales gross margin and sales net profit margin were relatively stable and maintained at a high level, and the profitability was excellent. From 2017 to 2021, the company's expense ratio showed a downward trend, reaching 15.93% in 2021, reflecting the scale effect. The company's R&D expenses continued to grow, with 22.95 million yuan, 31.39 million yuan, 37.88 million yuan, 46.53 million yuan and 55.627 million yuan in 2017-2021, respectively. The proportion of R&D expenses to operating income was 8.1%, 6.6%, 6.4% and 5.9% respectively, maintaining a high level.
THE ROE in 2021 was 20.37%, the ROA was 17.47%, which decreased compared with 2020, and the asset-liability ratio remained at a low level, maintaining a range of 18.28%-26.69% in 2017-2021, without large debts to be repaid in the short term, and the solvency was strong. The company's net profit cash ratio in 2021 has been greatly reduced, mainly due to the increase in cash paid for services purchased for goods exceeding the cash received for the sale of goods to provide services, and the net cash flow generated by the company's operating activities has decreased by 24.68% year-on-year.
In terms of business, the company's operating income is mainly digital printing equipment and ink, in 2021, the company's digital printing equipment revenue accounted for 57.74%, ink accounted for 34.09%, and the proportion of ink revenue increased relatively. From the perspective of sub-business gross margin, digital jet printing equipment and ink gross margin in 2017-2021 is relatively stable, ink gross margin is slightly higher than digital jet printing equipment, which is related to the cost reduction of ink in recent years, but also the company's "equipment first, consumables follow-up" business model advantages of the embodiment, by providing equipment users with self-developed digital printing ink, while driving the growth of ink sales, forming a scale advantage. (Source: Future Think Tank)
2 Digital printing has been opened to replace traditional printing
2.1 Digital printing penetration rate just broke 10%
2.1.1 In response to industrial upgrading and environmental protection needs, the demand for digital printing is released
In the textile printing industry, textile digital printing technology is a breakthrough in traditional printing technology, it overcomes the traditional printing high pollution, high energy consumption, slow delivery speed, printing pattern is relatively monotonous, printing accuracy is general and the production process is complex and other shortcomings, with no need to make nets, slurry, no chromatic restrictions, no printing volume restrictions and other advantages, at the same time it also has the characteristics of green environmental protection, time saving, water saving, power saving and so on. This is in line with the global development strategy of industrial upgrading, energy conservation and emission reduction and people's personalized consumption trends, and the global digital printing volume of textiles has shown an accelerated development trend since 2001.
According to the data provided by the "Global Textile Digital Inkjet Printing Development Status and Trend In-depth Analysis", the global textile digital inkjet printing output continued to rise from 2014 to 2019, accounting for 7.6% of the printing fabrics from 2.2% in 2014 to 7.6% in 2019. The proportion of digital inkjet printing in the Chinese market also increased from 1.8% to 11.2%. The China Printing and Dyeing Association expects the global digital printing penetration rate to reach 27% in 2025, and the penetration rate of digital printing in China will increase to 29%.
Digital inkjet printing equipment sales estimation assumptions:
1) Global printed fabric production assumption: In 2018, the global printed fabric production showed a year-on-year increase trend, and the output in 2019 decreased slightly. In 2020, due to the impact of the new crown epidemic, production is expected to decline to 46 billion meters, down nearly 20% year-on-year. It is expected that the market demand for printed fabrics will rise sharply in 2021-2022, gradually returning to the pre-epidemic level, with a growth rate of 10%, and after 2023, the growth rate will slow down and return to normal levels, with a growth rate of about 0.6%.
2) Global digital printing cloth penetration rate assumption: It is expected that after the epidemic, the digital inkjet printing market will continue to grow, and by the end of 2025, its penetration rate is expected to reach 27%.
3) Single average annual output assumption: the current proportion of digital transfer equipment in the market is high, and most of them are low-speed machines with a printing speed of less than 30 meters / hour, the average annual output of a single device is low, with technological progress and equipment updates, it is expected that the equipment printing speed of high-end equipment will increase, and the printing speed will be greatly improved, from 97,200 meters / year / unit in 2019 to 111,700 meters / year / unit in 2025.
4) Elimination assumption: With the continuous progress of digital inkjet printing technology and the continuous release of quality and differentiated consumer demand, digital inkjet printing equipment will enter the peak period of upgrading. In 2019, the elimination of global digital inkjet printing equipment reached 18700 units, the equipment elimination rate of the year was 40.7%, with 5 years as a renewal cycle, it is expected that 2019-2021 will be the end of 2018 all the equipment eliminated, so the equipment elimination rate in 2019-2021 has a significant increase, after 2022 gradually return to normal levels, assuming that the equipment elimination rate in 2020-2025 is 32.1%, 30.2%, 20.0%, 20.0%, 20.0%、20.0%。
5) Take the installed capacity of the current year as the approximate equipment sales for the current year. Installed capacity of the current year = year-end ownership + elimination amount of the current year - ownership at the beginning of the year (ownership at the end of the previous year). Based on the above assumptions, we estimate that the global sales of digital printing equipment from 2021 to 2025 will be 27,389 units, 28,686 units, 36,961 units, 40,356 units and 49,769 units, respectively.
2.1.2 The proportion of the Asian market has increased, and the Chinese market has great potential
European equipment manufacturers have long occupied the mainstream of the market and guided the development of industry technology, and before 2017, Europe's textile digital printing output has been ranked first in the world. However, after 2018, the production of the Asian region rose rapidly, and in the same year, it surpassed Europe, and this trend is still accelerating. According to WTiN statistics, in 2018, the European region accounted for 37% of the global total in textile digital inkjet printing, and the Asian region accounted for 39% of the global total. Among them, China, India, Pakistan's output accounted for 42%, 19%, 10% of the Asian market, ranking in the top three, Asia has surpassed Europe to become the largest producer of digital inkjet printing. From the global distribution of digital printing equipment ownership, the proportion of equipment ownership in Asia has exceeded 50% of the world, exceeding the European region by 26 percentage points. It is expected that the largest increase in the market in the future will still come from Asia, and China, as the "bellwether" of the digital inkjet printing market, has great market potential.
2.2 In line with the needs of differentiation, the cost of digital printing is near the critical point
2.2.1 Digital inkjet printing meets individual needs
With the improvement of economic development and living standards, the consumption concept of the textile market has undergone major changes, and the consumption demand for textiles with multiple varieties, personalization, short cycles, focusing on cultural creativity and environmental protection is increasing day by day, and the consumer demand oriented by "customer personalization and demand speed" abandons the traditional textile printing and dyeing "large-volume, slow-changing" business model. Digital inkjet printing fits the personalized, fashionable and rapidly changing consumer trends, conforms to the development direction of high-quality, personalized and flexible printing textiles, and to a certain extent, it also represents the direction of innovative and ecological printing and dyeing upgrades, with broad development space. On-demand printing is a development trend in the future, and inkjet printing technology promotes the development of this trend, and e-commerce platforms will also become a new driving force for the development of the industry.
According to the "Global Textile Digital Inkjet Printing Development Status and Trend In-depth Analysis", the number of digital inkjet printing equipment in the world has increased from 27840 units in 2014 to 42490 in 2019, with a compound annual growth rate of 8.8%. The installed capacity increased from 5770 units in 2014 to 15200 units in 2019, with a compound annual growth rate of 21.37%. In 2019, 18,700 digital inkjet printing equipment were eliminated worldwide. With the continuous progress of digital inkjet printing technology and the continuous release of quality and differentiated consumer demand, digital inkjet printing equipment will enter the peak period of upgrading.
2.2.2 Costs are nearing a tipping point and economics are becoming increasingly prominent
According to the "China Textile Digital Inkjet Printing Development Report" released by the China Printing and Dyeing Industry Association in 2019, in the past five years, digital printing processing fees have dropped by about 50%. The comprehensive cost of direct injection digital printing has dropped from 8-10 yuan / meter in 2017 to 5-7 yuan / meter in 2020, the comprehensive cost of digital transfer has dropped from 5 yuan / meter in 2017 to 2 yuan / meter in 2020, and the price decline of the main varieties of ink is mostly 50% and above, and the decline in paint ink has reached 80%, creating a greater competitive advantage for digital printing production.
Digital inkjet printing equipment to achieve automated control process, especially the transfer of printing equipment, a skilled worker can operate multiple equipment at the same time, greatly saving the number of personnel, reducing labor costs. According to the data of China Printing and Dyeing Industry Association, from 2017 to 2020, the processing cost of digital inkjet printing is declining, and the average cost of ink is also in a downward trend, especially the comprehensive cost of digital transfer machines is approaching the average cost of traditional printing, and the application benefits of digital inkjet printing are constantly prominent.
We assume that the cost of activated ink and dispersed ink will be reduced to 75,000 yuan / ton and 25,000 yuan / ton, respectively, based on digital self-spraying 1 meter using ink 15g and digital transfer 6.5g, the average cost of activated ink in digital inkjet printing fabrics in 2025 is 1.13 yuan / meter, and the average cost of dispersed ink is 0.16 yuan / meter. In addition, as all localities strengthen the control of printing and dyeing sewage indicators, the cost of traditional printing and dyeing environmental protection continues to rise, according to the existing data, every 100 meters of printing and dyeing cloth will produce 3-5 tons of sewage, according to the cost of printing and dyeing wastewater treatment GB4287-2012 direct discharge standards of about 4.7 yuan / ton, while the traditional printing to achieve zero discharge of printing and dyeing wastewater Its cost will be nearly doubled.
Therefore, considering the price of ink and environmental protection costs, the comprehensive cost of digital transfer printing will drop to 1.52 yuan / meter by 2025, and the cost of traditional printing will further rise to 1.41-1.99 yuan / meter. It is expected that by 2025, the comprehensive cost of digital transfer printing will be lower than that of traditional printing, and digital printing will show more and more competitiveness than traditional printing.
2.2.3 Policy support to help the development of the industry
In recent years, the national government departments at all levels have successively issued a series of relevant policies to encourage and promote the development of the green printing and dyeing and digital inkjet printing industries, driving the continuous expansion of the scale of related industries. The specific impact is as follows: On the one hand, digital inkjet printing as a promotion technology for energy-saving and emission-reduction dyeing has become a strategic new industry that the country vigorously promotes development. At present, digital printing relies on intelligent manufacturing technology, under the joint research of "production, learning and research", the technical level has been kept in sync with the international level. On the other hand, in formulating specific policies, the state has persisted in supporting the superior and strengthening the strong, and has increased subsidies for high-tech research and development. It provides a boost to the development of the digital printing industry.
2.3 Overseas enterprises are the mainstay, and domestic Honghua is rising
2.3.1 The technology is leading, and the domestic leader has a significant position
As one of the few enterprises in China that has mastered the core intellectual property rights of the whole process from algorithm research and development to system integration digital printing equipment manufacturing, the company firmly occupies a dominant position in the domestic market, and the domestic comparable companies are mainly Hanhong Group, Hope Hi-Tech, and Hangzhou Kaiyuan Computer Technology Co., Ltd. According to the statistics of China Textile Machinery Association, from 2017 to 2019, the company ranked first in the sales volume of high-end textile digital inkjet printing machines in China, and the market share exceeded 50%.
2.3.2 The world is dominated by overseas enterprises, and Honghua Digital ranks in the top three
While consolidating the domestic market, the company goes abroad, competes with international first-line counterparts, actively expands overseas business, and successfully enters the major international digital printing markets such as Italy, Pakistan, india, etc., and together with MS, EFI-Reggiani, Mimaki, Konica Minolta and other enterprises occupy half of the global digital printing equipment application market. According to data released by the World Textile Information Network (WTiN), the proportion of textiles produced by the company's digital jet printing equipment in the total number of global digital printing products has steadily increased from 12% in 2017 to 13% in 2018, and the gap with the top two in the industry has gradually narrowed. (Source: Future Think Tank)
3 Honghua Digital: the competitive advantage is outstanding, and the expansion cycle has begun
3.1 Adopt the high-quality strategy of "equipment first, consumables follow-up"
Since its establishment, the company has been focusing on the research, development and application of digital jet printing technology, and its main business and business model have undergone four stages of evolution: from 1992 to 1999, it is the research and development stage of textile printing software and hardware, from 2000 to 2006, it is the stage of digital jet printing product promotion, from 2007 to 2016, it is the diversified application stage of digital jet printing technology, and from 2017 to the present, it is the professional application stage of textile digital jet printing machine. The company focuses on the research and development of digital printing technology, the production and sales of digital printing equipment, and continuously improves and optimizes the product structure, and promotes the transformation and upgrading of the textile printing and dyeing industry through high-end intelligent technology.
Based on the long-term accumulation of industry experience and understanding of the upstream and downstream of the textile industry chain, combined with customer application needs, the company implements the business model of "equipment first, consumables follow-up", and the main products are digital printing equipment and ink. Digital jet printing equipment includes three categories: digital direct jet printing machine, digital inkjet transfer printing machine and ultra-high speed industrial printing machine.
In 2000, the company successfully launched the first generation of textile digital printing machine - DPM-1800A textile digital machine, breaking the monopoly of foreign countries, opening the transformation of the traditional printing and dyeing industry, and taking the lead in developing the "image adaptive digital precision printing system" to make precision printing possible. The company's digital direct injection machine is mainly divided into Vega D series and Vega S series according to product performance standards, the company's digital direct injection machine revenue is growing rapidly, the total sales revenue of the two series of main models accounts for more than 80% of the digital direct injection machine revenue, of which the growth mainly comes from the D series models.
Digital transfer machine is mainly used in the chemical fiber market, in recent years, the cost of use has been decreasing, and the price of traditional chemical fiber cloth printing is gradually approaching, and the replacement of traditional chemical fiber cloth printing is accelerating. The company launched the Model model in 2018, with the characteristics of printing and drying integration, light model, suitable for small batches, multi-batch market demand, high cost performance and accurate market positioning so that the model model sales quickly increased, resulting in scale effect, the average price from 591,200 yuan in 2018 to 338,100 yuan / unit in 2019, further reduced to 319,700 yuan / unit in 2020. At the same time, as the Model series models are more in line with the needs of the current market, the company has reduced the production of the Vega P series.
Ultra-high-speed industrial printing machines mainly include Single Pass, round mesh + series, flat screen + series models. Single Pass adopts a one-way printing method, the nozzle does not need to move laterally, can achieve synchronous printing with the circle screen, is the first choice for high-volume printing. In addition, the flat screen / circular mesh + series of models is the combination of digital inkjet printing machine and traditional flat screen / circular screen printing machine, which can achieve a comprehensive balance in printing speed, cost and quality. The company's current ultra-high-speed industrial printing machine sales accounted for a relatively low proportion, only two units sold in 2020, sales revenue accounted for only 1.7%, it is expected that with the future high-end model demand growth, ultra-high-speed industrial machine market is expected to expand.
3.1.1 Equipment and ink integration strategy
The business model of "equipment first, consumables follow-up" drives revenue growth. The company's ink products include activated ink, dispersed ink, etc., based on the adaptability of the nozzle, with high purity, good fluency, high stability, wide color gamut, high color yield, fine environmental protection, anti-nozzle clogging and other characteristics. In recent years, based on the decline in ink market prices, the adaptability advantages of original ink, the growth of the company's equipment sales and the increase in stock, the company's ink sales revenue has grown rapidly, from 88.8167 million yuan in 2017 to 321.5384 million yuan in 2021, and the proportion of sales revenue in the company's main business income is basically about 30%, and the sales scale continues to grow, which also verifies the correctness of the company's "equipment first, consumables follow-up" business model. The company's digital printing equipment revenue and ink revenue complement each other, with the company's equipment ownership increased, ink sales scale will continue to grow.
As a supporting product of digital printing equipment, the core of digital printing ink lies in the adaptability with digital printing equipment. The company's independent research and development of environmentally friendly ink formula, on the one hand, the use of nanofiltration membrane treatment and purification technology to meet the adaptability of the corresponding nozzle, to ensure the color saturation, color gamut, color fastness, stability and other applicable requirements, on the other hand, the production cost of ink continues to decline, effectively promoting the customer from the traditional printing and dyeing process to digital printing transformation upgrade. Compared with Hanhong Group, a comparable company in the same industry, the company's ink sales unit price is maintained at a relatively low level and the gross profit margin is high, which has a price advantage.
On March 7, 2022, the Company announced that it intends to acquire a 67% stake in Jingli Digital for RMB67 million. After the completion of the transaction, Jingli Digital became a holding subsidiary of the company. In 2020, the company purchased 24.53 million yuan from Jingli Digital, accounting for 5.48% of the company's total procurement. This acquisition is conducive to improving the self-production rate of the company's ink, further reducing the cost of ink production, enhancing the company's core competitiveness, and enhancing the company's ability to resist risks. In the future, the company's ink sales revenue and gross profit margin level are expected to continue to increase, further consolidate the "equipment + ink" position, and expand market share.
3.2 Technology + scale, outstanding competitive advantage
3.2.1 Technology leading, cost-effective
The company independently controls the most core software development and programming links, forming a unique core competitiveness. The core competitiveness of the company's digital printing equipment lies in the consistency of the printing effect, operational stability, high-speed operation and high cost performance, which in addition to the performance of the nozzle, the precision machining technology of the equipment, mainly depends on the image data processing system, precision motion control system, inkjet control system, electrical / information path system, mechanical control system and other control assemblies, software / algorithms integrated development. The company will be the above self-developed comprehensive technology in the form of embedded software independently integrated into the board, independent control of the most core software development and programming links.
At present, the company's printing equipment configuration of the many-core parallel processing system has achieved up to 256 processor cores real-time parallel operation, so that the data processing capacity can reach 3.8Gbps, control more than 180,000 nozzles per second Up to 5.4 billion times per second of controlled implementation, so that the company's digital printing equipment can achieve up to 4,500 m / h ultra-high speed printing speed, in the industry leader. In addition, the company has mastered the image adaptive digital precision printing technology and the precision motion closed-loop control system technology, which can ensure the success of accurate digital overprinting. The main models developed by the company based on the above core technologies have reached the international level of competition in terms of performance indicators and comprehensive competitiveness, and have competed with similar international products in the global market.
At the same time, the company independently purchases core components such as nozzles, independently processes some nozzle hard load components, and formulates nozzle installation and equipment installation and commissioning standards, which ensures the quality of equipment while enabling the company to have better cost control capabilities.
The company has established a equipment + ink (consumables) business model, relying on its own equipment advantages to establish a better customer relationship, follow-up by providing ink to achieve customer contribution to the company's continuous revenue, the recent proposed acquisition of ink subcontractor Jingli Digital, to further improve the ink self-production rate, reduce ink costs; the company's nozzle varieties are single and centralized procurement, forming a scale advantage, procurement cost advantage.
The price of the same performance equipment is only 60-70% of the company's price of MS, EFI and other international competitions. Original imported Italy MS high-speed high-quality guide belt digital printing machine MS-JP6 domestic price of 2.75 million yuan, printing speed of 160 m / hour, cloth width support 1.6-1.8 meters, printing speed of 256-288 square meters / hour, MS-JPK price of 5.58 million yuan, printing speed of 590 square meters / hour; the company's digital direct injection machine D series in 2020 average price of 1.72 million yuan, the maximum printing speed of 1000 square meters / hour, S series 20 years average price of 700,000 yuan , maximum printing speed 300 m²/hr.
Since its inception, the company has been focusing on the domestic digital printing technology and equipment development, production and sales of leading enterprises, is one of the few international manufacturers to achieve circular mesh and Single Pass synchronous overprinting technology, the accuracy of the relative error can reach 0.1mm or less. The combination of digital printing and traditional circular screen printing can not only give play to the advantages of traditional printing in terms of base color and large color blocks, but also combine the advantages of digital printing in fine and complex patterns. In 2015, the company and international manufacturers simultaneously launched 32 industrial-grade nozzles of high-speed printing equipment, and the sprinkler head scanning speed can reach 2.2m/s. In addition, the company's self-developed RIP software and AT Soft proof color management system support 4~12 color configurations, and more color channels make the color gamut of digital printing patterns wider and more delicate and exquisite. The same scanning mode, in the case of the quality of the nozzle, the number of nozzles, and the basic accuracy, the company's current main model is comparable to the performance of similar products of internationally renowned equipment manufacturers.
At the same time, the Single Pass machine developed by the company can achieve the printing speed of traditional screen printing equipment, and through the warp directional one-way printing, it completely avoids the problems of multi-layer image and misalignment printing that occurs in the multi-dimensional multi-way printing of the scanner, and the printing quality is better. This model is suitable for industrialized large-batch, multi-batch, multi-flower order production, and the performance of EFI-Reggiani and MS in the market is comparable.
Digital printing equipment is a high-tech product, large technical investment, high technical threshold, the need for long-term continuous technical development and investment can achieve the efficiency and stability of the equipment, high cost and long-term, the company's long-term investment in the field of digital jet printing makes it have technical advantages compared with the same industry companies.
3.2.2 Focus on research and development, with outstanding results
The company has been deeply engaged in the field of digital printing for nearly 30 years, and its technical personnel have rich experience. The digital printing equipment industry is a talent-intensive industry, which requires technicians with rich industry experience and strong innovation ability to solve various problems of customers in the process of product use in the first time and ensure the efficient operation of products. Since the domestic digital printing industry is in the early stage of application, technical personnel with rich knowledge and experience accumulation are relatively scarce, the company, as the leader in the field of domestic digital printing, has established an effective talent team after accumulating time, and the relevant technical personnel have rich experience.
Since its establishment, the company has been focusing on the research, development and application of digital jet printing technology, and is the first enterprise in China to apply digital jet printing technology to textile industry production. The company has a total of 98 R & D personnel, accounting for 27.84% of the total number of employees in the company. The company is the "National Digital Printing Engineering Technology Research Center" approved by the Ministry of Science and Technology, with academician expert workstations and postdoctoral research workstations. Relying on the projects of "Textile Digital Printing System and Its Application" and "Research and Development and Application of Key Technologies of Ultra-high-speed Digital Printing Equipment", the company's core technical personnel won the second prize of national technological invention issued by the State Council in 2007 and 2017 respectively. The company has undertaken or participated in 5 national high-tech research and development program (863 program) projects, 4 national science and technology support program projects, and 1 national high-tech industry development project; led or participated in the drafting of 3 industry standards and 3 Zhejiang manufacturing group standards, with strong R&D advantages. In addition, the company's core R & D personnel also actively carry out the development and manufacturing research of core equipment sprinklers, and participate in the national high-tech research and development plan (863 plan) of "development and manufacture of industrial-grade piezoelectric sprinklers".
3.2.3 Scale advantage drives cost reduction
As one of the earliest enterprises engaged in the production, research and development and sales of digital printing equipment in China, the company is one of the enterprises with deep roots and rich technical experience in the industry. After years of development, the company's printing equipment sales mold is located in the forefront of the industry, compared with other enterprises in the industry, with a strong scale advantage, the company with a strong scale advantage, support digital printing equipment and consumables of fixed research and development costs, in the procurement of a strong bargaining power, to the company's top five suppliers Saiyang Technology as an example, its sales revenue to the company accounted for more than 80% of its operating income, which reflects the company's strong bargaining power, further guarantee that the company can effectively implement cost control.
The company's 2017-2020 digital direct injection machine production was 108, 214, 236, 195 units, respectively, the output of transfer printers increased by 19 times, from 28 to 535 units; ink production increased from 1705.6 tons in 2018 to 3555.4 tons in 2020, the output doubled.
The significant increase in the output of the main products has strengthened the company's scale advantage, and the average cost of a single digital printing equipment of the company has continued to decline, with cost reductions of 16.67% and 12.16% in 2019 and 2020, respectively, while the single cost of digital printing machines of Hanhong Group has shown an upward trend, with unit costs rising by 13.82% and 10.07% in 2019 and 2020, respectively. Among them, the average cost of a single digital transfer machine of the company in 2020 dropped to 199,600 yuan / unit, the price of the core component nozzle dropped to an average of 77,500 yuan / unit, and the increase in the cost of the digital direct injection machine was mainly due to the continuous upgrading of the direct jet D series models, and the cost and average sales price rose with the upgrading of functions.
At the same time, the company's ink costs have also dropped significantly, with ink costs of 62,400 yuan / ton, 53,600 yuan / ton, 47,800 yuan / ton and 38,800 yuan / ton in 2017-2020, respectively, while the ink cost of Hanhong Group is much higher than that of the company, with costs of 94,600 yuan / ton, 82,200 yuan / ton and 90,500 yuan / ton in 2017-2019, respectively.
In addition, the company with the early stage of equipment sales, has accumulated a large number of customer resources, follow-up through consumables sales, technical support and other good customer service, to maintain a continuous and stable cooperative relationship with customers, further consolidate and improve the company's industry position, to achieve a steady increase in market share.
3.3 Low customer concentration, strong bargaining power of Honghua
2018-2021Q1 The purchase amount of the company's top five customers is relatively stable, the top five customers contribute revenue to the company's overall revenue ratio of 9.9%-13.5%, the single customer procurement scale is relatively small, and the customer concentration is low. Considering that the company's downstream customers are textile industry customers, the market size is large, there are many industry customers, and the customer concentration is low, which is also in line with industry practices.
3.4 When the equipment expansion is carried out, it is expected that the production capacity will increase by 5.8 times in the next 2-3 years
The company's IPO raised funds investment projects include "annual output of 2,000 sets of industrial digital printing equipment and consumables intelligent chemical plant" project, "industrial digital printing technology research and development center construction project" and supplementary working capital, by the end of 2021, the company's "annual output of 2,000 sets of industrial digital printing equipment and consumables intelligent factory" has completed the acceptance of the single plant, is carrying out underground pipeline and public engineering construction, related production equipment has also entered the installation and commissioning stage. After being officially put into production, the production capacity and quality of the company's digital printing equipment will be greatly improved. After the completion of the project, the company will also have an independent production capacity of 5,000 tons of digital printing ink per year, further enhancing the core competitiveness of the company's ink market. The "Industrial Digital Printing Technology R&D Center Construction Project" is being promoted in an orderly manner, laying a solid foundation for the company's future development. Supplementary liquidity has been largely completed.
In 2021, the increase in the company's construction projects mainly comes from the "Fuyang Intelligent Factory Construction Project" (that is, the fundraising project "Annual Output of 2,000 Sets of New Industrial Digital Printing Equipment and Consumables Intelligent Factory Construction Project"), with the increasing investment in the construction of the project, as of December 31, 2021, the amount of the project under construction is 124.3584 million yuan, and the project progress is 69.09%. In addition, the company's recent non-public offering intends to raise investment and investment in the construction of "annual output of 3520 sets of industrial digital printing equipment intelligent production line construction project", the next 2-3 years the company will add 2,000 + 3,520 = 5,520 equipment capacity, compared with the company's 2021 950 equipment output has about 5.8 times the new production capacity.
4 Profit forecasting and investment analysis
4.1 Profit forecasting assumptions are split from the business
Digital printing development trend is good, the current economy is gradually reflected, especially the transfer equipment, the company as the domestic digital printing equipment leader development trend is better, relying on direct injection technology to start, the direct spray technology grafted to the transfer equipment, to achieve rapid breakthroughs in transfer equipment, competitiveness is strong. Therefore, the prediction of the company's equipment sales we mainly from the supply side, and ink as a consumable, and the company's own equipment matching degree is higher, so the overall growth rate is similar to the equipment growth rate, or even more than the equipment growth rate, the reason is that the company relies on the equipment to establish the ink cost advantage may be stronger.
1) Equipment: the company's IPO raised 2000 units of projects is expected to reach production at the end of this year, the 3520 equipment production line under construction is expected to reach production around 2024, combined with the current company's production capacity, we expect the company's sales volume in 2022-2024 is 1,211/1,989/3,276 units, the corresponding growth rate is 45.4%/64.2%/64.7%, in the short term, the growth rate of digital transfer equipment is faster, and the growth rate of digital direct injection equipment is slower Continuing with the economic gradually reflect the growth rate will increase, we assume that the growth rate of transfer printing equipment will exceed that of direct injection equipment, but considering the general trend of price reduction in the industry; from the unit price dimension, price reduction is the driving force for the rapid development of the industry, assuming that the average price of the company's digital printing equipment in 2022-2024 will be 5.3%/7.7%/7.5%, and the average price of digital direct printing equipment and digital printing equipment will show a downward trend. The company enjoys pricing power in the industry, and the decline in the average price of equipment is mainly achieved through large-scale cost reduction, which is why the company's average price in 2018-2021 has fallen by 38.4%, but the overall gross profit margin has risen from 39.5% to 41.7% Main reason, assuming that this advantage continues to play, assuming that the gross profit margin in 2022-2024 is maintained at 41.7% in 2021.
2) Ink: The company's ink sales increased from 1,531 tons in 2018 to 5,242 tons in 2021 (compound growth rate of 50.7%), and the average price fell from 97,000 yuan / ton to 61,000 yuan / ton, a decrease of 36.9%, and the gross profit margin remained above 44%. Ink business as a consumables of equipment in the future with the company's equipment sales continue to increase, and the company's ink may be more competitive because of the scale advantage, we assume that the ink growth rate in the next 3 years is 40%, 50%, 50%, the average price assumption continues to decrease, at a rate of 5 points per year, and the average price reduction can be transmitted to suppliers, gross profit margin assumptions maintained at 44.0% in 2021.
(This article is for informational purposes only and does not represent any of our investment advice.) For usage information, see the original report. ）
Honghua Digital Research Report: Digital printing leader, equipment + consumables two-wheel drive trend has become
2022-05-10 09:39 · Cai is
(Report Producer/Author: Minsheng Securities, Li Zhe, Luo Song)
1 Basic situation: digital printing faucet, equipment + ink dual drive
1.1 Focus on the market for 30 years, equipment + ink dual main business
Founded in 1992, starting with textile CAD/CAM, the company has been deeply engaged in the field of digital printing for nearly 30 years, forming a density curve optimization technology based on machine learning, the applicability optimization and expansion technology based on color management specifications (ICC), color management engine, super capacity data crowd core parallel processing technology, precision electromechanical control system, nano ink formula and other core technologies, is a digital printing technology as the core, focus, digital printing industrial applications, set pre-sale consultation, in-sale debugging, After-sales service and software support in one of the textile digital printing integrated solution provider, the company through the provision of digital printing integration solutions to provide customers with digital printing to realize the application of equipment, consumables promotion, the main products for digital direct printing machine, digital inkjet transfer printing machine, ultra-high speed industrial printing machine and ink.
1.2 The actual controller holds 26.39% of the shares, and the equity incentives of the core members are in place
The company's equity structure is stable, and the actual controller Jin Xiaotuan indirectly holds 26.39% of the company's equity through Ningbo Weixin, Chibo Company and Baoxin Digital. Jin Xiaotuan, the actual controller, is a professor-level senior engineer with a technical background, and has served as the chairman and general manager of Honghua Digital since October 2016, and is now also the executive director of Baoxin Digital and Chibo Company. The six core members of the company hold the shareholding platform of Chibo Company, the core members hold 17.91% of the shares of Chibo Company, and Chibo Company holds 12.49% of the equity of listed companies.
1.3 Revenue CAGR=35.1% and Attributable Net Profit CAGR=43.0% in 2017-2021
From 2017 to 2021, the company's revenue growth rate CAGR = 35.1%, 2021 revenue reached 940 million yuan, an increase of 31.74% year-on-year; attributable net profit increased from 0.54 billion yuan in 2017 to 227 million yuan in 2021, CAGR = 43.0%, an increase of 32.4% year-on-year in 2021. 2021 operating results and attributable net profit increased rapidly compared with the same period of the previous year, mainly due to the impact of the epidemic in the previous year, resulting in a relatively low amount in the same period of the previous year, on the basis of the domestic epidemic situation is well controlled, the company's business in 2021 quickly recovered.
From 2009 to 2021, the company's gross profit margin remained basically stable at 38.4%-45.3%, and the net profit margin was 16.7%-24.4%, overall, the company's sales gross margin and sales net profit margin were relatively stable and maintained at a high level, and the profitability was excellent. From 2017 to 2021, the company's expense ratio showed a downward trend, reaching 15.93% in 2021, reflecting the scale effect. The company's R&D expenses continued to grow, with 22.95 million yuan, 31.39 million yuan, 37.88 million yuan, 46.53 million yuan and 55.627 million yuan in 2017-2021, respectively. The proportion of R&D expenses to operating income was 8.1%, 6.6%, 6.4% and 5.9% respectively, maintaining a high level.
THE ROE in 2021 was 20.37%, the ROA was 17.47%, which decreased compared with 2020, and the asset-liability ratio remained at a low level, maintaining a range of 18.28%-26.69% in 2017-2021, without large debts to be repaid in the short term, and the solvency was strong. The company's net profit cash ratio in 2021 has been greatly reduced, mainly due to the increase in cash paid for services purchased for goods exceeding the cash received for the sale of goods to provide services, and the net cash flow generated by the company's operating activities has decreased by 24.68% year-on-year.
In terms of business, the company's operating income is mainly digital printing equipment and ink, in 2021, the company's digital printing equipment revenue accounted for 57.74%, ink accounted for 34.09%, and the proportion of ink revenue increased relatively. From the perspective of sub-business gross margin, digital jet printing equipment and ink gross margin in 2017-2021 is relatively stable, ink gross margin is slightly higher than digital jet printing equipment, which is related to the cost reduction of ink in recent years, but also the company's "equipment first, consumables follow-up" business model advantages of the embodiment, by providing equipment users with self-developed digital printing ink, while driving the growth of ink sales, forming a scale advantage. (Source: Future Think Tank)
2 Digital printing has been opened to replace traditional printing
2.1 Digital printing penetration rate just broke 10%
2.1.1 In response to industrial upgrading and environmental protection needs, the demand for digital printing is released
In the textile printing industry, textile digital printing technology is a breakthrough in traditional printing technology, it overcomes the traditional printing high pollution, high energy consumption, slow delivery speed, printing pattern is relatively monotonous, printing accuracy is general and the production process is complex and other shortcomings, with no need to make nets, slurry, no chromatic restrictions, no printing volume restrictions and other advantages, at the same time it also has the characteristics of green environmental protection, time saving, water saving, power saving and so on. This is in line with the global development strategy of industrial upgrading, energy conservation and emission reduction and people's personalized consumption trends, and the global digital printing volume of textiles has shown an accelerated development trend since 2001.
According to the data provided by the "Global Textile Digital Inkjet Printing Development Status and Trend In-depth Analysis", the global textile digital inkjet printing output continued to rise from 2014 to 2019, accounting for 7.6% of the printing fabrics from 2.2% in 2014 to 7.6% in 2019. The proportion of digital inkjet printing in the Chinese market also increased from 1.8% to 11.2%. The China Printing and Dyeing Association expects the global digital printing penetration rate to reach 27% in 2025, and the penetration rate of digital printing in China will increase to 29%.
Digital inkjet printing equipment sales estimation assumptions:
1) Global printed fabric production assumption: In 2018, the global printed fabric production showed a year-on-year increase trend, and the output in 2019 decreased slightly. In 2020, due to the impact of the new crown epidemic, production is expected to decline to 46 billion meters, down nearly 20% year-on-year. It is expected that the market demand for printed fabrics will rise sharply in 2021-2022, gradually returning to the pre-epidemic level, with a growth rate of 10%, and after 2023, the growth rate will slow down and return to normal levels, with a growth rate of about 0.6%.
2) Global digital printing cloth penetration rate assumption: It is expected that after the epidemic, the digital inkjet printing market will continue to grow, and by the end of 2025, its penetration rate is expected to reach 27%.
3) Single average annual output assumption: the current proportion of digital transfer equipment in the market is high, and most of them are low-speed machines with a printing speed of less than 30 meters / hour, the average annual output of a single device is low, with technological progress and equipment updates, it is expected that the equipment printing speed of high-end equipment will increase, and the printing speed will be greatly improved, from 97,200 meters / year / unit in 2019 to 111,700 meters / year / unit in 2025.
4) Elimination assumption: With the continuous progress of digital inkjet printing technology and the continuous release of quality and differentiated consumer demand, digital inkjet printing equipment will enter the peak period of upgrading. In 2019, the elimination of global digital inkjet printing equipment reached 18700 units, the equipment elimination rate of the year was 40.7%, with 5 years as a renewal cycle, it is expected that 2019-2021 will be the end of 2018 all the equipment eliminated, so the equipment elimination rate in 2019-2021 has a significant increase, after 2022 gradually return to normal levels, assuming that the equipment elimination rate in 2020-2025 is 32.1%, 30.2%, 20.0%, 20.0%, 20.0%、20.0%。
5) Take the installed capacity of the current year as the approximate equipment sales for the current year. Installed capacity of the current year = year-end ownership + elimination amount of the current year - ownership at the beginning of the year (ownership at the end of the previous year). Based on the above assumptions, we estimate that the global sales of digital printing equipment from 2021 to 2025 will be 27,389 units, 28,686 units, 36,961 units, 40,356 units and 49,769 units, respectively.
2.1.2 The proportion of the Asian market has increased, and the Chinese market has great potential
European equipment manufacturers have long occupied the mainstream of the market and guided the development of industry technology, and before 2017, Europe's textile digital printing output has been ranked first in the world. However, after 2018, the production of the Asian region rose rapidly, and in the same year, it surpassed Europe, and this trend is still accelerating. According to WTiN statistics, in 2018, the European region accounted for 37% of the global total in textile digital inkjet printing, and the Asian region accounted for 39% of the global total. Among them, China, India, Pakistan's output accounted for 42%, 19%, 10% of the Asian market, ranking in the top three, Asia has surpassed Europe to become the largest producer of digital inkjet printing. From the global distribution of digital printing equipment ownership, the proportion of equipment ownership in Asia has exceeded 50% of the world, exceeding the European region by 26 percentage points. It is expected that the largest increase in the market in the future will still come from Asia, and China, as the "bellwether" of the digital inkjet printing market, has great market potential.
2.2 In line with the needs of differentiation, the cost of digital printing is near the critical point
2.2.1 Digital inkjet printing meets individual needs
With the improvement of economic development and living standards, the consumption concept of the textile market has undergone major changes, and the consumption demand for textiles with multiple varieties, personalization, short cycles, focusing on cultural creativity and environmental protection is increasing day by day, and the consumer demand oriented by "customer personalization and demand speed" abandons the traditional textile printing and dyeing "large-volume, slow-changing" business model. Digital inkjet printing fits the personalized, fashionable and rapidly changing consumer trends, conforms to the development direction of high-quality, personalized and flexible printing textiles, and to a certain extent, it also represents the direction of innovative and ecological printing and dyeing upgrades, with broad development space. On-demand printing is a development trend in the future, and inkjet printing technology promotes the development of this trend, and e-commerce platforms will also become a new driving force for the development of the industry.
According to the "Global Textile Digital Inkjet Printing Development Status and Trend In-depth Analysis", the number of digital inkjet printing equipment in the world has increased from 27840 units in 2014 to 42490 in 2019, with a compound annual growth rate of 8.8%. The installed capacity increased from 5770 units in 2014 to 15200 units in 2019, with a compound annual growth rate of 21.37%. In 2019, 18,700 digital inkjet printing equipment were eliminated worldwide. With the continuous progress of digital inkjet printing technology and the continuous release of quality and differentiated consumer demand, digital inkjet printing equipment will enter the peak period of upgrading.
2.2.2 Costs are nearing a tipping point and economics are becoming increasingly prominent
According to the "China Textile Digital Inkjet Printing Development Report" released by the China Printing and Dyeing Industry Association in 2019, in the past five years, digital printing processing fees have dropped by about 50%. The comprehensive cost of direct injection digital printing has dropped from 8-10 yuan / meter in 2017 to 5-7 yuan / meter in 2020, the comprehensive cost of digital transfer has dropped from 5 yuan / meter in 2017 to 2 yuan / meter in 2020, and the price decline of the main varieties of ink is mostly 50% and above, and the decline in paint ink has reached 80%, creating a greater competitive advantage for digital printing production.
Digital inkjet printing equipment to achieve automated control process, especially the transfer of printing equipment, a skilled worker can operate multiple equipment at the same time, greatly saving the number of personnel, reducing labor costs. According to the data of China Printing and Dyeing Industry Association, from 2017 to 2020, the processing cost of digital inkjet printing is declining, and the average cost of ink is also in a downward trend, especially the comprehensive cost of digital transfer machines is approaching the average cost of traditional printing, and the application benefits of digital inkjet printing are constantly prominent.
We assume that the cost of activated ink and dispersed ink will be reduced to 75,000 yuan / ton and 25,000 yuan / ton, respectively, based on digital self-spraying 1 meter using ink 15g and digital transfer 6.5g, the average cost of activated ink in digital inkjet printing fabrics in 2025 is 1.13 yuan / meter, and the average cost of dispersed ink is 0.16 yuan / meter. In addition, as all localities strengthen the control of printing and dyeing sewage indicators, the cost of traditional printing and dyeing environmental protection continues to rise, according to the existing data, every 100 meters of printing and dyeing cloth will produce 3-5 tons of sewage, according to the cost of printing and dyeing wastewater treatment GB4287-2012 direct discharge standards of about 4.7 yuan / ton, while the traditional printing to achieve zero discharge of printing and dyeing wastewater Its cost will be nearly doubled.
Therefore, considering the price of ink and environmental protection costs, the comprehensive cost of digital transfer printing will drop to 1.52 yuan / meter by 2025, and the cost of traditional printing will further rise to 1.41-1.99 yuan / meter. It is expected that by 2025, the comprehensive cost of digital transfer printing will be lower than that of traditional printing, and digital printing will show more and more competitiveness than traditional printing.
2.2.3 Policy support to help the development of the industry
In recent years, the national government departments at all levels have successively issued a series of relevant policies to encourage and promote the development of the green printing and dyeing and digital inkjet printing industries, driving the continuous expansion of the scale of related industries. The specific impact is as follows: On the one hand, digital inkjet printing as a promotion technology for energy-saving and emission-reduction dyeing has become a strategic new industry that the country vigorously promotes development. At present, digital printing relies on intelligent manufacturing technology, under the joint research of "production, learning and research", the technical level has been kept in sync with the international level. On the other hand, in formulating specific policies, the state has persisted in supporting the superior and strengthening the strong, and has increased subsidies for high-tech research and development. It provides a boost to the development of the digital printing industry.
2.3 Overseas enterprises are the mainstay, and domestic Honghua is rising
2.3.1 The technology is leading, and the domestic leader has a significant position
As one of the few enterprises in China that has mastered the core intellectual property rights of the whole process from algorithm research and development to system integration digital printing equipment manufacturing, the company firmly occupies a dominant position in the domestic market, and the domestic comparable companies are mainly Hanhong Group, Hope Hi-Tech, and Hangzhou Kaiyuan Computer Technology Co., Ltd. According to the statistics of China Textile Machinery Association, from 2017 to 2019, the company ranked first in the sales volume of high-end textile digital inkjet printing machines in China, and the market share exceeded 50%.
2.3.2 The world is dominated by overseas enterprises, and Honghua Digital ranks in the top three
While consolidating the domestic market, the company goes abroad, competes with international first-line counterparts, actively expands overseas business, and successfully enters the major international digital printing markets such as Italy, Pakistan, india, etc., and together with MS, EFI-Reggiani, Mimaki, Konica Minolta and other enterprises occupy half of the global digital printing equipment application market. According to data released by the World Textile Information Network (WTiN), the proportion of textiles produced by the company's digital jet printing equipment in the total number of global digital printing products has steadily increased from 12% in 2017 to 13% in 2018, and the gap with the top two in the industry has gradually narrowed. (Source: Future Think Tank)
3 Honghua Digital: the competitive advantage is outstanding, and the expansion cycle has begun
3.1 Adopt the high-quality strategy of "equipment first, consumables follow-up"
Since its establishment, the company has been focusing on the research, development and application of digital jet printing technology, and its main business and business model have undergone four stages of evolution: from 1992 to 1999, it is the research and development stage of textile printing software and hardware, from 2000 to 2006, it is the stage of digital jet printing product promotion, from 2007 to 2016, it is the diversified application stage of digital jet printing technology, and from 2017 to the present, it is the professional application stage of textile digital jet printing machine. The company focuses on the research and development of digital printing technology, the production and sales of digital printing equipment, and continuously improves and optimizes the product structure, and promotes the transformation and upgrading of the textile printing and dyeing industry through high-end intelligent technology.
Based on the long-term accumulation of industry experience and understanding of the upstream and downstream of the textile industry chain, combined with customer application needs, the company implements the business model of "equipment first, consumables follow-up", and the main products are digital printing equipment and ink. Digital jet printing equipment includes three categories: digital direct jet printing machine, digital inkjet transfer printing machine and ultra-high speed industrial printing machine.
In 2000, the company successfully launched the first generation of textile digital printing machine - DPM-1800A textile digital machine, breaking the monopoly of foreign countries, opening the transformation of the traditional printing and dyeing industry, and taking the lead in developing the "image adaptive digital precision printing system" to make precision printing possible. The company's digital direct injection machine is mainly divided into Vega D series and Vega S series according to product performance standards, the company's digital direct injection machine revenue is growing rapidly, the total sales revenue of the two series of main models accounts for more than 80% of the digital direct injection machine revenue, of which the growth mainly comes from the D series models.
Digital transfer machine is mainly used in the chemical fiber market, in recent years, the cost of use has been decreasing, and the price of traditional chemical fiber cloth printing is gradually approaching, and the replacement of traditional chemical fiber cloth printing is accelerating. The company launched the Model model in 2018, with the characteristics of printing and drying integration, light model, suitable for small batches, multi-batch market demand, high cost performance and accurate market positioning so that the model model sales quickly increased, resulting in scale effect, the average price from 591,200 yuan in 2018 to 338,100 yuan / unit in 2019, further reduced to 319,700 yuan / unit in 2020. At the same time, as the Model series models are more in line with the needs of the current market, the company has reduced the production of the Vega P series.
Ultra-high-speed industrial printing machines mainly include Single Pass, round mesh + series, flat screen + series models. Single Pass adopts a one-way printing method, the nozzle does not need to move laterally, can achieve synchronous printing with the circle screen, is the first choice for high-volume printing. In addition, the flat screen / circular mesh + series of models is the combination of digital inkjet printing machine and traditional flat screen / circular screen printing machine, which can achieve a comprehensive balance in printing speed, cost and quality. The company's current ultra-high-speed industrial printing machine sales accounted for a relatively low proportion, only two units sold in 2020, sales revenue accounted for only 1.7%, it is expected that with the future high-end model demand growth, ultra-high-speed industrial machine market is expected to expand.
3.1.1 Equipment and ink integration strategy
The business model of "equipment first, consumables follow-up" drives revenue growth. The company's ink products include activated ink, dispersed ink, etc., based on the adaptability of the nozzle, with high purity, good fluency, high stability, wide color gamut, high color yield, fine environmental protection, anti-nozzle clogging and other characteristics. In recent years, based on the decline in ink market prices, the adaptability advantages of original ink, the growth of the company's equipment sales and the increase in stock, the company's ink sales revenue has grown rapidly, from 88.8167 million yuan in 2017 to 321.5384 million yuan in 2021, and the proportion of sales revenue in the company's main business income is basically about 30%, and the sales scale continues to grow, which also verifies the correctness of the company's "equipment first, consumables follow-up" business model. The company's digital printing equipment revenue and ink revenue complement each other, with the company's equipment ownership increased, ink sales scale will continue to grow.
As a supporting product of digital printing equipment, the core of digital printing ink lies in the adaptability with digital printing equipment. The company's independent research and development of environmentally friendly ink formula, on the one hand, the use of nanofiltration membrane treatment and purification technology to meet the adaptability of the corresponding nozzle, to ensure the color saturation, color gamut, color fastness, stability and other applicable requirements, on the other hand, the production cost of ink continues to decline, effectively promoting the customer from the traditional printing and dyeing process to digital printing transformation upgrade. Compared with Hanhong Group, a comparable company in the same industry, the company's ink sales unit price is maintained at a relatively low level and the gross profit margin is high, which has a price advantage.
On March 7, 2022, the Company announced that it intends to acquire a 67% stake in Jingli Digital for RMB67 million. After the completion of the transaction, Jingli Digital became a holding subsidiary of the company. In 2020, the company purchased 24.53 million yuan from Jingli Digital, accounting for 5.48% of the company's total procurement. This acquisition is conducive to improving the self-production rate of the company's ink, further reducing the cost of ink production, enhancing the company's core competitiveness, and enhancing the company's ability to resist risks. In the future, the company's ink sales revenue and gross profit margin level are expected to continue to increase, further consolidate the "equipment + ink" position, and expand market share.
3.2 Technology + scale, outstanding competitive advantage
3.2.1 Technology leading, cost-effective
The company independently controls the most core software development and programming links, forming a unique core competitiveness. The core competitiveness of the company's digital printing equipment lies in the consistency of the printing effect, operational stability, high-speed operation and high cost performance, which in addition to the performance of the nozzle, the precision machining technology of the equipment, mainly depends on the image data processing system, precision motion control system, inkjet control system, electrical / information path system, mechanical control system and other control assemblies, software / algorithms integrated development. The company will be the above self-developed comprehensive technology in the form of embedded software independently integrated into the board, independent control of the most core software development and programming links.
At present, the company's printing equipment configuration of the many-core parallel processing system has achieved up to 256 processor cores real-time parallel operation, so that the data processing capacity can reach 3.8Gbps, control more than 180,000 nozzles per second Up to 5.4 billion times per second of controlled implementation, so that the company's digital printing equipment can achieve up to 4,500 m / h ultra-high speed printing speed, in the industry leader. In addition, the company has mastered the image adaptive digital precision printing technology and the precision motion closed-loop control system technology, which can ensure the success of accurate digital overprinting. The main models developed by the company based on the above core technologies have reached the international level of competition in terms of performance indicators and comprehensive competitiveness, and have competed with similar international products in the global market.
At the same time, the company independently purchases core components such as nozzles, independently processes some nozzle hard load components, and formulates nozzle installation and equipment installation and commissioning standards, which ensures the quality of equipment while enabling the company to have better cost control capabilities.
The company has established a equipment + ink (consumables) business model, relying on its own equipment advantages to establish a better customer relationship, follow-up by providing ink to achieve customer contribution to the company's continuous revenue, the recent proposed acquisition of ink subcontractor Jingli Digital, to further improve the ink self-production rate, reduce ink costs; the company's nozzle varieties are single and centralized procurement, forming a scale advantage, procurement cost advantage.
The price of the same performance equipment is only 60-70% of the company's price of MS, EFI and other international competitions. Original imported Italy MS high-speed high-quality guide belt digital printing machine MS-JP6 domestic price of 2.75 million yuan, printing speed of 160 m / hour, cloth width support 1.6-1.8 meters, printing speed of 256-288 square meters / hour, MS-JPK price of 5.58 million yuan, printing speed of 590 square meters / hour; the company's digital direct injection machine D series in 2020 average price of 1.72 million yuan, the maximum printing speed of 1000 square meters / hour, S series 20 years average price of 700,000 yuan , maximum printing speed 300 m²/hr.
Since its inception, the company has been focusing on the domestic digital printing technology and equipment development, production and sales of leading enterprises, is one of the few international manufacturers to achieve circular mesh and Single Pass synchronous overprinting technology, the accuracy of the relative error can reach 0.1mm or less. The combination of digital printing and traditional circular screen printing can not only give play to the advantages of traditional printing in terms of base color and large color blocks, but also combine the advantages of digital printing in fine and complex patterns. In 2015, the company and international manufacturers simultaneously launched 32 industrial-grade nozzles of high-speed printing equipment, and the sprinkler head scanning speed can reach 2.2m/s. In addition, the company's self-developed RIP software and AT Soft proof color management system support 4~12 color configurations, and more color channels make the color gamut of digital printing patterns wider and more delicate and exquisite. The same scanning mode, in the case of the quality of the nozzle, the number of nozzles, and the basic accuracy, the company's current main model is comparable to the performance of similar products of internationally renowned equipment manufacturers.
At the same time, the Single Pass machine developed by the company can achieve the printing speed of traditional screen printing equipment, and through the warp directional one-way printing, it completely avoids the problems of multi-layer image and misalignment printing that occurs in the multi-dimensional multi-way printing of the scanner, and the printing quality is better. This model is suitable for industrialized large-batch, multi-batch, multi-flower order production, and the performance of EFI-Reggiani and MS in the market is comparable.
Digital printing equipment is a high-tech product, large technical investment, high technical threshold, the need for long-term continuous technical development and investment can achieve the efficiency and stability of the equipment, high cost and long-term, the company's long-term investment in the field of digital jet printing makes it have technical advantages compared with the same industry companies.
3.2.2 Focus on research and development, with outstanding results
The company has been deeply engaged in the field of digital printing for nearly 30 years, and its technical personnel have rich experience. The digital printing equipment industry is a talent-intensive industry, which requires technicians with rich industry experience and strong innovation ability to solve various problems of customers in the process of product use in the first time and ensure the efficient operation of products. Since the domestic digital printing industry is in the early stage of application, technical personnel with rich knowledge and experience accumulation are relatively scarce, the company, as the leader in the field of domestic digital printing, has established an effective talent team after accumulating time, and the relevant technical personnel have rich experience.
Since its establishment, the company has been focusing on the research, development and application of digital jet printing technology, and is the first enterprise in China to apply digital jet printing technology to textile industry production. The company has a total of 98 R & D personnel, accounting for 27.84% of the total number of employees in the company. The company is the "National Digital Printing Engineering Technology Research Center" approved by the Ministry of Science and Technology, with academician expert workstations and postdoctoral research workstations. Relying on the projects of "Textile Digital Printing System and Its Application" and "Research and Development and Application of Key Technologies of Ultra-high-speed Digital Printing Equipment", the company's core technical personnel won the second prize of national technological invention issued by the State Council in 2007 and 2017 respectively. The company has undertaken or participated in 5 national high-tech research and development program (863 program) projects, 4 national science and technology support program projects, and 1 national high-tech industry development project; led or participated in the drafting of 3 industry standards and 3 Zhejiang manufacturing group standards, with strong R&D advantages. In addition, the company's core R & D personnel also actively carry out the development and manufacturing research of core equipment sprinklers, and participate in the national high-tech research and development plan (863 plan) of "development and manufacture of industrial-grade piezoelectric sprinklers".
3.2.3 Scale advantage drives cost reduction
As one of the earliest enterprises engaged in the production, research and development and sales of digital printing equipment in China, the company is one of the enterprises with deep roots and rich technical experience in the industry. After years of development, the company's printing equipment sales mold is located in the forefront of the industry, compared with other enterprises in the industry, with a strong scale advantage, the company with a strong scale advantage, support digital printing equipment and consumables of fixed research and development costs, in the procurement of a strong bargaining power, to the company's top five suppliers Saiyang Technology as an example, its sales revenue to the company accounted for more than 80% of its operating income, which reflects the company's strong bargaining power, further guarantee that the company can effectively implement cost control.
The company's 2017-2020 digital direct injection machine production was 108, 214, 236, 195 units, respectively, the output of transfer printers increased by 19 times, from 28 to 535 units; ink production increased from 1705.6 tons in 2018 to 3555.4 tons in 2020, the output doubled.
The significant increase in the output of the main products has strengthened the company's scale advantage, and the average cost of a single digital printing equipment of the company has continued to decline, with cost reductions of 16.67% and 12.16% in 2019 and 2020, respectively, while the single cost of digital printing machines of Hanhong Group has shown an upward trend, with unit costs rising by 13.82% and 10.07% in 2019 and 2020, respectively. Among them, the average cost of a single digital transfer machine of the company in 2020 dropped to 199,600 yuan / unit, the price of the core component nozzle dropped to an average of 77,500 yuan / unit, and the increase in the cost of the digital direct injection machine was mainly due to the continuous upgrading of the direct jet D series models, and the cost and average sales price rose with the upgrading of functions.
At the same time, the company's ink costs have also dropped significantly, with ink costs of 62,400 yuan / ton, 53,600 yuan / ton, 47,800 yuan / ton and 38,800 yuan / ton in 2017-2020, respectively, while the ink cost of Hanhong Group is much higher than that of the company, with costs of 94,600 yuan / ton, 82,200 yuan / ton and 90,500 yuan / ton in 2017-2019, respectively.
In addition, the company with the early stage of equipment sales, has accumulated a large number of customer resources, follow-up through consumables sales, technical support and other good customer service, to maintain a continuous and stable cooperative relationship with customers, further consolidate and improve the company's industry position, to achieve a steady increase in market share.
3.3 Low customer concentration, strong bargaining power of Honghua
2018-2021Q1 The purchase amount of the company's top five customers is relatively stable, the top five customers contribute revenue to the company's overall revenue ratio of 9.9%-13.5%, the single customer procurement scale is relatively small, and the customer concentration is low. Considering that the company's downstream customers are textile industry customers, the market size is large, there are many industry customers, and the customer concentration is low, which is also in line with industry practices.
3.4 When the equipment expansion is carried out, it is expected that the production capacity will increase by 5.8 times in the next 2-3 years
The company's IPO raised funds investment projects include "annual output of 2,000 sets of industrial digital printing equipment and consumables intelligent chemical plant" project, "industrial digital printing technology research and development center construction project" and supplementary working capital, by the end of 2021, the company's "annual output of 2,000 sets of industrial digital printing equipment and consumables intelligent factory" has completed the acceptance of the single plant, is carrying out underground pipeline and public engineering construction, related production equipment has also entered the installation and commissioning stage. After being officially put into production, the production capacity and quality of the company's digital printing equipment will be greatly improved. After the completion of the project, the company will also have an independent production capacity of 5,000 tons of digital printing ink per year, further enhancing the core competitiveness of the company's ink market. The "Industrial Digital Printing Technology R&D Center Construction Project" is being promoted in an orderly manner, laying a solid foundation for the company's future development. Supplementary liquidity has been largely completed.
In 2021, the increase in the company's construction projects mainly comes from the "Fuyang Intelligent Factory Construction Project" (that is, the fundraising project "Annual Output of 2,000 Sets of New Industrial Digital Printing Equipment and Consumables Intelligent Factory Construction Project"), with the increasing investment in the construction of the project, as of December 31, 2021, the amount of the project under construction is 124.3584 million yuan, and the project progress is 69.09%. In addition, the company's recent non-public offering intends to raise investment and investment in the construction of "annual output of 3520 sets of industrial digital printing equipment intelligent production line construction project", the next 2-3 years the company will add 2,000 + 3,520 = 5,520 equipment capacity, compared with the company's 2021 950 equipment output has about 5.8 times the new production capacity.
4 Profit forecasting and investment analysis
4.1 Profit forecasting assumptions are split from the business
Digital printing development trend is good, the current economy is gradually reflected, especially the transfer equipment, the company as the domestic digital printing equipment leader development trend is better, relying on direct injection technology to start, the direct spray technology grafted to the transfer equipment, to achieve rapid breakthroughs in transfer equipment, competitiveness is strong. Therefore, the prediction of the company's equipment sales we mainly from the supply side, and ink as a consumable, and the company's own equipment matching degree is higher, so the overall growth rate is similar to the equipment growth rate, or even more than the equipment growth rate, the reason is that the company relies on the equipment to establish the ink cost advantage may be stronger.
1) Equipment: the company's IPO raised 2000 units of projects is expected to reach production at the end of this year, the 3520 equipment production line under construction is expected to reach production around 2024, combined with the current company's production capacity, we expect the company's sales volume in 2022-2024 is 1,211/1,989/3,276 units, the corresponding growth rate is 45.4%/64.2%/64.7%, in the short term, the growth rate of digital transfer equipment is faster, and the growth rate of digital direct injection equipment is slower Continuing with the economic gradually reflect the growth rate will increase, we assume that the growth rate of transfer printing equipment will exceed that of direct injection equipment, but considering the general trend of price reduction in the industry; from the unit price dimension, price reduction is the driving force for the rapid development of the industry, assuming that the average price of the company's digital printing equipment in 2022-2024 will be 5.3%/7.7%/7.5%, and the average price of digital direct printing equipment and digital printing equipment will show a downward trend. The company enjoys pricing power in the industry, and the decline in the average price of equipment is mainly achieved through large-scale cost reduction, which is why the company's average price in 2018-2021 has fallen by 38.4%, but the overall gross profit margin has risen from 39.5% to 41.7% Main reason, assuming that this advantage continues to play, assuming that the gross profit margin in 2022-2024 is maintained at 41.7% in 2021.
2) Ink: The company's ink sales increased from 1,531 tons in 2018 to 5,242 tons in 2021 (compound growth rate of 50.7%), and the average price fell from 97,000 yuan / ton to 61,000 yuan / ton, a decrease of 36.9%, and the gross profit margin remained above 44%. Ink business as a consumables of equipment in the future with the company's equipment sales continue to increase, and the company's ink may be more competitive because of the scale advantage, we assume that the ink growth rate in the next 3 years is 40%, 50%, 50%, the average price assumption continues to decrease, at a rate of 5 points per year, and the average price reduction can be transmitted to suppliers, gross profit margin assumptions maintained at 44.0% in 2021.
(This article is for informational purposes only and does not represent any of our investment advice.) For usage information, see the original report. ）
Featured report source: [Future Think Tank].