Ping An Securities: Gave a buy rating to ZPCON Technology

Ping An Securities Co., Ltd. recently conducted research on ZKTeco and released a research report "Rapid Growth in Performance, Optimistic About the Growth of the Company's Main Business", this report gives a buy rating to ZKTeco, and the current stock price is 46.7 yuan.

Central Control Technology(688777)

Matters:

The company announced the first quarter report of 2024, in the first quarter of 2024, the company achieved operating income of 1.738 billion yuan, a year-on-year increase of 20.25%, and net profit attributable to the parent company of 145 million yuan, a year-on-year increase of 57.39%.

Ping An Perspective:

The company's performance in the first quarter of 2024 has achieved rapid growth. According to the company's announcement, in the first quarter of 2024, the company achieved operating income of 1.738 billion yuan, a year-on-year increase of 20.25%, achieving rapid growth, net profit attributable to the parent company of 145 million yuan, a year-on-year increase of 57.39%, achieving rapid growth, and a net profit margin attributable to the parent company of 8.37%, an increase of 1.98 percentage points over the same period last year, and achieving a gross profit margin of 31.03%. In terms of expenses, in the first quarter of 2024, the company achieved an expense ratio of 25.21% during the period, a decrease of 5.1 percentage points from the same period last year, and the cost control effect was remarkable.

The company has a strong leading position in the field of automation in the process industry. According to the statistics of Rui Industry, in 2023, the market share of the company's core product distributed control system (DCS) in China has reached 37.8%, ranking first in the domestic DCS market share for 13 consecutive years. Among them, in 2023, the company's market share of DCS in the chemical/petrochemical field will reach 56.3%/49.3% respectively, an increase of 1.5/4.5 percentage points respectively over the previous year, and the company will rank first in the DCS market share of the three major industries of chemical, petrochemical and building materials in 2023, and its reliability, stability and availability have reached the international advanced level. According to the statistics of China Industrial Control Network, the domestic market share of the company's core product safety instrumented system (SIS) will be 33.7% in 2023, an increase of 4.7 percentage points from the previous year, and it will rank first in the domestic SIS market share for two consecutive years. The company's industrial automation control system products have obvious leading advantages. In 2023, the company's industrial automation and intelligent manufacturing solutions business (excluding industrial software) revenue will be 3.461 billion yuan, a year-on-year increase of 12.66%, accounting for 40.15% of revenue, which is the company's main source of income. The gross profit margin of the company's industrial automation and intelligent manufacturing solutions was 41.06%, an increase of 1.42 percentage points over the same period of last year, mainly due to the low gross profit margin of large projects in 2022, and the company's contract revenue of more than 10 million yuan in 2023 will be 699 million yuan, accounting for 14.11% of the business revenue, and the gross profit margin of this part will be 38.76%, which is an increase from 2022. The company's leading position in the field of process industry automation is stable, and the company's automation control system business is expected to maintain rapid growth and continue to empower the company's growth.

A variety of industry-leading industrial software empowers the development of automation and intelligent manufacturing business. In terms of market share: According to the statistics of China Industrial Control Network, the market share of many of the company's core industrial software products will rank among the top in 2023. Among them, the company's advanced control and process optimization software (APC) has a domestic market share of 28.2%, ranking first in the domestic market share for five consecutive years, Manufacturing Execution System (MES) has a domestic process industry market share of 20.7%, ranking first in the domestic process industry market share for two consecutive years, and operator training simulation system (OTS) has a domestic market share of 14%, ranking first in the domestic market share for the first time. In terms of projects, the company has fully applied the new model of "1+2+N" smart factory, continued to deepen cooperation with Yulong Petrochemical, and established a model for the application of "PA+BA" in large-scale refining and chemical integration projects. In 2023, the company won the bid for the 16 liquor intelligent brewing projects of Luzhou Laojiao and the "smart energy" planning and consulting project of Langjiu Group, laying a solid foundation for subsequent industry development. In addition, the company's "PA+BA" and "factory operating system + industrial APP" product technologies have also achieved a number of breakthrough applications in large overseas customers, such as Saudi Aramco and its holding companies IMI Group, Indorama Group, Indonesia Sinar Mas Paper and other enterprises. In 2023, the company's industrial software business (including "industrial software" in the product category and "control system + software + others" under "industrial automation and intelligent manufacturing solutions") will achieve revenue of 2.198 billion yuan, a year-on-year increase of 14.08%, with revenue accounting for 25.50% and gross profit margin of 41.30%, an increase of 0.91 percentage points over the same period of last year. As the optimization means of the company's automation and intelligent manufacturing solutions and the company's strategic development direction, industrial software will open up growth space for the company's future development.

The "5S+S2B" model has been gradually deepened, and overseas markets have continued to develop. The company has built a new one-stop industrial service model of 5S offline stores + S2B online platform. 1) 5S stores: By 2023, the company has completed the construction of 179 5S stores (including overseas), covering 643 chemical parks across the country, and established the first overseas 5S store in Saudi Arabia. The company continues to expand the scale of 5S stores, and the number of 5S stores with a single store contract amount exceeding 200 million yuan has reached 2, further consolidating the excellent operation system of 5S stores and implementing the 5S store partnership system. 2) S2B business: In 2023, the company has broken through a number of group-type benchmark customers, simultaneously promoted the cooperation of more than 250 large customers with the Federal Reserve and Reserve, seamlessly connected the customer procurement system, and helped customers transform into digital procurement. As of 2023, the company has covered more than 30,000 customers in the process industry, and the customer coverage rate has further increased. In 2023, the company's S2B business will achieve revenue of 1.897 billion yuan, an increase of 117.07% over the same period of the previous year, achieving rapid growth and a gross profit margin of 10.11%. 3) Abroad: The company continues to increase the market layout and development in Southeast Asia, the Middle East, Africa, Europe, Central Asia, Japan and other overseas regions, and has set up subsidiaries in Singapore, Saudi Arabia, India, Malaysia, Indonesia, Japan, Kazakhstan and other countries, vigorously promoted and built overseas localized operation capabilities, provided better services for overseas users, and successfully promoted the application of the company's core products to more than 50 countries.

Profit forecast and investment suggestions: According to the company's first quarter report in 2024, we adjust the performance forecast, and it is expected that the company's net profit attributable to the parent company from 2024 to 2026 will be 1.383 billion yuan (the previous value was 1.460 billion yuan), 1.744 billion yuan (the previous value was 1.905 billion yuan), 2.201 billion yuan (new), EPS is 1.75 yuan, 2.21 yuan and 2.79 yuan respectively, and the PE corresponding to the closing price on April 17 is about 26.8, 21.3 and 16.9 times respectively. The company is a leading enterprise in domestic process industry automation control system and intelligent manufacturing solutions. Benefiting from the growth and localization of the industrial automation control system industry, the company's automation control system business will be able to maintain rapid growth and continue to empower the company's growth. The company closely follows the development trend of the intelligent manufacturing industry, faces the industry 4.0, vigorously lays out and develops the industrial software business, continues to release new products, expands new areas, and continuously improves the market share. In addition, the company's S2B platform business and overseas business have outstanding performance, which will become a new engine for the company's future development. We are bullish on the company's future and maintain our "Highly Recommended" rating.

Risk warning: (1) The business development of automatic control system does not meet expectations. The company's automation control system business is affected by the growth rate of fixed asset investment of customers in downstream industries such as chemical industry and petrochemical, and if the growth rate of fixed asset investment of downstream customers is lower than expected, the company's automation control system business will have the risk of not developing as expected. (2) The development of industrial software business did not meet expectations. The company closely follows the development trend of the intelligent manufacturing industry and vigorously lays out and develops the industrial software business for Industry 4.0. If the future market acceptance of the company's industrial software products is lower than expected, the company's industrial software business will be at risk of not developing as expected. (3) The business development of "5S store + S2B" did not meet expectations. At present, the company's "5S store + S2B" business development momentum is rapid. As of 2023, the company has completed the construction of 179 5S stores, and if the expansion progress of 5S stores in the future is lower than expected, the company's "5S store + S2B" business will have the risk of not meeting expectations.

According to the calculation of the research report data released in the past three years, the research team of Guo Weixiu of CICC has conducted in-depth research on the stock, with an average forecast accuracy of 91.11% in the past three years, and its forecast attributable net profit in 2024 is 1.328 billion yuan, and the predicted PE is 27.96 based on the current price.

The breakdown of the latest earnings estimates is as follows:

A total of 24 institutions have rated the stock over the last 90 days, with 23 having a buy rating and 1 having an overweight rating, with an average institutional price target of 56.64 over the last 90 days.

The above content is compiled by Securities Star based on public information, generated by an algorithm (Network Information Calculation No. 310104345710301240019), and has nothing to do with the position of this site, if there is a problem with the data, please contact us. This article is a compilation of data and does not constitute any investment advice for you, investment is risky, please make a cautious decision.