(Report Producer/Author: Huaan Securities, Guo Qianqian)
<h1 class="pgc-h-arrow-right" data-track="101" >1 The accumulation of thin hair has made the domestic fire safety system leader</h1>
1.1 Based on the general fire alarm system, we will continue to expand the product line and downstream applications
Bluebird Fire is a well-known enterprise in the domestic fire protection industry, the main business is the research, development, production and sales of fire safety system products. The company's current core business is the general fire alarm system: the fire automatic alarm and linkage control system as the main system, and at the same time includes five small categories of supporting systems and automatic gas fire extinguishing systems. The five sub-categories of systems are: electrical fire monitoring system, fire equipment power supply monitoring system, fire door monitoring system, combustible gas alarm system (gas detection system) and residual pressure monitoring system. With the continuous development of the company, the business scope has gradually expanded from the general fire alarm system to the emerging fields such as industrial fields, emergency evacuation, and smart fire protection. The company's brand reputation continues to improve, and in 2015 it was rated as a high-tech enterprise by the Science and Technology Department, the Department of Finance, the State Taxation Bureau and the Local Taxation Bureau of Hebei Province, and ranked first in the brand evaluation list of the top 500 preferred suppliers of China's real estate development enterprises for two consecutive years in 2020 and 2021.
Deep ploughing in the field of fire safety products for 20 years, endogenous epitaxial two-wheel drive has achieved the leading domestic fire alarm system enterprise. In 2001, with the gradual cancellation of administrative examination and approval in the fire protection industry to a market access system, Peking University Blue Bird Huanyu led the establishment of Blue Bird Fire Co., Ltd., as a private enterprise through the acquisition of radio factory and Lingyun safety to obtain fire alarm production qualifications and technology, officially participate in the fire safety product market competition, and constantly improve the production line of anti-safety alarm. In 2007, the company acquired 75% of the equity of the same industry enterprise Jiuyuan Intelligence, absorbed technology and expanded the fire alarm product line. In 2008, it began to change its sales model, gradually shifting from office to "distribution-oriented, direct sales supplemented" sales model.
In 2012, the company completed the shareholding system reform. In 2013, it acquired Zhengtianqi and Weitai Safety to expand into the field of gas fire extinguishing and gas detection. Since 2016, through continuous increased investment in Zhongke Zhichuang, we have entered the field of intelligent evacuation. In 2019, the company was listed on the main board of the Shenzhen Stock Exchange, and in the same year, the special chip "Crested Ibis" for self-developed fire alarm products was launched. In 2020, the company set up a wholly-owned subsidiary "Beijing Blue Bird Beautiful Life Technology Co., Ltd." to focus on the field of household fire protection, acquire 25.37% of the equity of Shanghai Konka Green Lighting Technology Co., Ltd. in March 2021, and invest in left-facing lighting (indirectly holding 37.62% of the equity) in August to improve the technology, quality and production of emergency intelligent evacuation products.
The company has no actual controller, and chairman Cai Weimin "takes the helm" to preside over the overall development of the company. The controlling shareholder of the company is Peking University Blue Bird Huanyu Technology Co., Ltd., with a shareholding ratio of 37.2%. Due to the dispersion of the equity structure of Peking University Blue Bird Huanyu, there is no actual controller, which indirectly leads to the fact that there is no actual controller for Blue Bird Fire. Cai Weimin, the current chairman of the company, was one of the core initiators at the beginning of the establishment of the company, with a shareholding ratio of 11.48%. Mr. Cai Weimin graduated from the Department of Physics of Peking University, has 20 years of experience in the fire protection industry, and is also a member of the sixth council of the China Fire Protection Association, a member of the Fire Detection and Alarm Sub-Technical Committee of the National Fire Protection Standardization Technical Committee, and a member of the National Professional Standardization Technical Committee. At present, the management with the chairman as the core directly makes decisions on the operation and management of the company, and there is less interference from other shareholders.
1.2 The product system is perfect, and we are committed to creating a "one-stop" closed loop of products and services
The company's existing business can be divided into "general fire alarm system", "emergency evacuation system", "gas detection system" and "gas fire extinguishing system". Among them, the "fire automatic alarm and linkage control system" business in the general fire alarm system constitutes the company's main source of income at present. Due to the disclosure of more subdivided product accounts in the company's financial report, according to product attributes and downstream applications, we summarize the company's product lines into four categories: "general fire alarm system", "emergency evacuation system", "gas detection system" and "gas fire extinguishing system", and in 2020, we will achieve revenue of 19.22, 1.80, 0.85 and 272 million yuan, accounting for 76.12%, 7.14%, 3.35% and 10.76% of the total revenue, respectively.
(1) General fire alarm section: including automatic alarm and joint control system and other supporting systems (electrical monitoring, fire door monitoring, power supply monitoring, residual pressure monitoring system), of which automatic alarm and joint control system (composed of controller, signal module, various types of induction detectors) is the largest source of revenue, 2011-2020, the revenue scale from 279 million to 1.573 billion, CAGR reached 21%, accounting for the proportion of total revenue from 93.5% gradually reduced to 62.3%, the main reason is that Since 2013, the company's product system has been continuously enriched, adding various supporting monitoring systems, emergency evacuation and other new products, resulting in a passive decline in the proportion of automatic alarm systems.
(2) Emergency intelligent evacuation section: Specific products include emergency lighting controllers, centralized control emergency sign lights, emergency lighting lamps, special power supplies, etc. In 2016, through the acquisition of Zhongke Zhichuang, it entered the field of emergency evacuation, and in 2021, it increased its left-facing lighting, and from 2016 to 2020, the revenue of the plate increased from 0.05 billion to 180 million, and the CAGR reached 150%, accounting for 7.14% from 0.36%. Benefiting from the policy outlet, there is still a lot of room for growth in the future.
(3) Gas detection system: Gas detection products include commercial combustible gas detection alarm, household independent combustible gas detection alarm and industrial explosion-proof grade gas detection and monitoring system (industrial products are mainly purchased by the subsidiary Weitai Safety Production in 2013), and the revenue from 0.01 billion yuan to 0.85 billion yuan in 2013-2020, CAGR reached 35.1%, accounting for 3.35% from 1.63% to 3.35%.
(4) Gas fire extinguishing system: In 2013, through the holding of Zhengtianqi, it began to produce gas fire extinguishing products, of which some products were used in the industrial field, from 2013 to 2020, the revenue increased from 0.16 billion yuan to 272 million yuan, and the CAGR reached 49.6%, accounting for 10.76% from 2.55%.
In terms of industrial-grade fire alarm products, the company has initially established a relatively complete industrial fire protection product line, including temperature sensing cables with differential temperature function, infrared/ultraviolet/composite flame detectors with self-test functions, image detectors, resistive leakage/pyrolysis particle detectors, suction air sampling detectors, etc., and it is expected that sales revenue recognition can be achieved in 2021.
The multi-dimensional product matrix covers the whole chain of fire alarm, and integrates the Bluebird intelligent fire protection platform to form a "one-stop" product and service closed loop. Bluebird products are deeply involved in the whole process of fire safety management (early warning→ alarm→ fire prevention → evacuation and escape → fire extinguishing), and then integrate through the intelligent fire protection platform (Bluebird Fire Cloud) established by Bluebird to enhance human-computer interaction, realize real-time monitoring feedback, cloud information summary and other functions, and truly form a "one-stop" closed loop of products and services. (Source: Future Think Tank)
<h1 class="pgc-h-arrow-right" data-track="95" >2 Industry attributes determine the four characteristics of the track", "long, wide, thick and slow"</h1>
2.1 "Long" - the fire industry has a long history, and economic concomitancy promotes the sustainable growth of the fire industry
China's fire protection products industry has entered the stage of market-oriented development for a short time, the market concentration is low, and it has the characteristics of "large industry and small company". Before the reform and opening up, China's fire products industry adopted the planned economy of the fixed-point production mode, each enterprise has obvious coverage of geographical division, with the deepening of reform and opening up, the fire protection industry gradually transformed into a strict filing license system, until 2001-2003 gradually canceled administrative approval, changed to market access system, into the stage of market-oriented development, industry participants increased, the scale expanded. According to the data of HC Fire Network, the market share of the top 30 enterprises in the consumer prevention industry is less than 10%, and the industry is dominated by small companies with sales of less than 5 million yuan. According to the research report on the development status of China's fire protection industry, as of 2016, the number of fire protection enterprises in China exceeded 28,000, of which about 5,700 fire product enterprises, about 1,000 were mainly engaged in automatic alarm systems, and about 600 were certified as mandatory products.
The fire protection industry has a strong economic affinity, and the continuous improvement of social investment in safety and security has led to the sustainable growth of the fire protection industry. The amount of fixed asset investment completed has remained high, exceeding 50 trillion yuan for 7 consecutive years, and in the process of slowing down the growth rate, the investment power structure has been continuously optimized. Similar to the security industry such as network security and security, it is difficult for the "disaster prevention, disaster reduction, and disaster relief" function of anti-epidemic products to directly create economic value, but it is accompanied by national economic growth and the accumulation of social wealth, and the investment in safety and security will continue to increase. We believe that the fire industry is expected to grow sustainably in the future, and the industrial security effect and social attention continue to increase, according to Zhiyan Consulting, between 2014 and 2019, the overall scale of the fire industry increased from 193 billion to 355.9 billion yuan, CAGR was 13.02%, of which the market size of fire products increased from 43 billion to 103.2 billion yuan, and the CAGR was 18.76%.
The proportion of fire protection products is on the rise, and The Blue Bird covers three of the major subdivisions, and the current domestic theoretical annual market space exceeds 50 billion yuan. From the perspective of industry classification, fire protection products belong to the fire industry, accounting for about 29% of the entire fire industry output value, and have an upward trend, on the one hand, because of the high value of the technical content, on the other hand, in the context of stricter policies, the on-site components of fire protection products have increased, and the proportion of fire protection products in the industry as a whole has shown an upward trend. Fire protection products include 6 sub-industries, namely fire equipment, general fire alarm, fire and evacuation, automatic fire extinguishing, ventilation and smoke prevention, fire water supply, Blue Bird across three of these sub-industries (general fire alarm, fire prevention and evacuation, automatic fire extinguishing), according to Zhiyan Consulting, in 2019, the market size of the three was about 276, 235, 59 billion yuan, a total of 57 billion yuan.
2.2 "Wide" - multi-disciplinary, multi-scenario, multi-level, weak dependence on commercial real estate
The "wide" characteristics of the fire industry are mainly reflected in:
(1) Product technology composition multidisciplinary intersection: fire line products are many, including microprocessors, detectors, sensors, parallel lines and fire extinguishing devices, etc., diversified product composition, subject knowledge sources are also diverse, including electronic information technology, electrical control, photoelectric control, network technology, manufacturing technology, digital technology and nano technology and many other disciplines.
(2) The diversification of application scenarios makes the market also have significant fragmentation characteristics: fire protection products are widely used, such as commercial malls, office buildings, residential buildings and other large or small micro places and other civil buildings, computer rooms, libraries, archives, mobile communication base stations, data centers, energy storage power stations and other places that need to set up special early warning and fire extinguishing systems, as well as pure wood structures and brick and wood structures, and the protection of ancient buildings with low fire resistance levels. The firefighting industry has a significant long tail effect, fluctuating wildly without relying on a single commercial property. From the perspective of the growth rate of housing completion area, affected by real estate control policies, the growth rate of housing completion area began to decline significantly in 2016 and entered a negative growth stage in 2018. Correspondingly, the growth rate of the fire market has slowed down, and it still maintains strong resilience, thanks to the continuous expansion of its application scenarios, and the steady increase in social investment in fire protection products; as far as the company is concerned, the downstream market expansion, the superimposed market share increases, and the growth of leading fire alarm equipment suppliers is expected to smooth the impact of the industry's weak cyclicality.
(3) The application market level is obvious, and different applications have their own requirements: fire safety products can be roughly divided into three levels of application in the field of home, commercial and industrial fields according to their main application areas, corresponding to different levels, different application requirements. In the family field, the main products used in fire extinguishers, gas masks, fire blankets, stand-alone fire detection alarms and other products pay attention to fire extinguishing, portable, easy to use and other characteristics. In the commercial field, the main use of automatic fire extinguishing systems, fire automatic alarm systems require attention to systematic network monitoring, for automatic induction and all-weather automatic monitoring requirements. In the industrial field, the main products include industrial gas detectors, flame detectors, temperature sensing cables and infrared image detection, etc., which mainly require the realization of safety data collection and automatic monitoring of smoke, gas leakage, electricity safety, fire water pressure and so on.
2.3 "Thick" - a deep moat under the accumulation of technical barriers and certification barriers
New entrants in the fire safety industry face high technical barriers and certification barriers, which require enterprises to accumulate technical know-how over the years and deepen the moat. (1) Technical barriers: the solution is in a large number of projects experienced in the verification and improvement of the continuous maturity, fire safety products need multidisciplinary knowledge cross-application, requiring the enterprise R & D team to have a long period of research and development, design experience accumulation, but also the need for enterprises to have good production equipment and advanced testing and inspection technology. (2) Certification barriers: The quality of fire products is directly related to personal and property safety, so the fire product market has clear access standards and quality specifications, and the implementation of mandatory certification and inspection system (will still be continuously supervised during the validity period) to ensure product quality, the industry has a certain threshold of access; and there is certification isolation between different markets, and the standard is different from the specification, such as China 3C certification, North American UL/ULC certificate and European CE certificate.
2.4 "Slow" - channels and brand awareness affect the company's business expansion, and the market share level will slowly increase in the future
The downstream of the industry is relatively fragmented, and the company's expansion relies on channels and brand awareness. Compared with the security industry, the fire protection industry has no municipal-level collective procurement of large customers, the downstream pattern is relatively scattered, and its business expansion requires the simultaneous expansion of personnel and channels, so while the revenue is growing, the company's sales personnel and sales expense rate have increased. From the perspective of the company, with the improvement of channel construction and the improvement of brand awareness, the market share level of leading companies is expected to slowly increase.
Compared with overseas leading enterprises, they are all well-known and established enterprises in the industry for decades. From a business point of view, overseas leading enterprises include building solutions specialized companies Johnson Controls and Carrier Global, as well as high-end manufacturing platform companies Siemens and Honeywell. Covering a wide range of scenarios, providing intelligent solutions for equipment and systems, in the field of fire protection and security, basically achieve integrated and coordinated development; from the perspective of revenue scale, Siemens takes the European market as the core, and Honeywell, Johnson, and Carrier take the US market as the core, basically completing the global layout. In 2020, The U.S. markets of Johnson, Honeywell, and Carrier accounted for 49%, 60%, and 52%, respectively, and the revenue of the three consumer and security solutions was about $10 billion, 5.2 billion, and 5 billion U.S. dollars, respectively, with a large revenue scale.
Compared with the mature market in the United States, there is still room for further improvement in the concentration of the domestic fire protection product market. According to Grand View Research, the global fire protection system market size is expected to reach $155.03 billion in 2027, with a compound annual growth rate of 7.5%, and the market size in 2020 is estimated to be about $93 billion, of which North America is the main market for fire protection system applications, accounting for about 35%, and we estimate that the theoretical value of the market size of fire protection products in the United States is about $32.5 billion (about 210 billion yuan), which leads to 2020, Johnson, Honeywell, Carrier's U.S. market share is about 15%, 10%, and 8%, respectively, totaling about 32%. Compared with China's market, according to the revenue scale of the three major fire alarm system suppliers (according to the 2019 data, Qingbird 2.3 billion, Gulf about 2 billion, Sanjiang about 900 million), the total market share of the three companies is 19.25%, and there is still room for improvement in the concentration of head enterprises. (Source: Future Think Tank)
<h1 class="pgc-h-arrow-right" data-track="84" >3 Track characteristics determine the three major competitive factors of enterprises</h1>
3.1 Industry know-How with a large amount of project experience, highlighting brand value
The accumulation of industry experience is crucial for fire product manufacturers, Blue Bird Fire has a large number of large project experience endorsement, is good at solving the fire difficulties in "customized fire fighting", and is expected to take the lead in upgrading from the fire alarm equipment factory to a solution provider. The company has been engaged in the production of fire protection products for nearly 20 years, and has participated in the construction of a number of star projects, such as about 10 national key projects such as Olympic Games venues and large international airports; more than 100 representative projects, involving various types of venues, large shopping malls, hospitals, office buildings, infrastructure, power and petrochemical scenarios. The company continuously accumulates industry experience, understands customer needs, and dynamically grasps the technical needs and development trends of customers in major areas for fire protection products. On this basis, the company on the customer needs in-depth analysis and summary, began to solve the fire difficulties in different scenarios, such as hospital scenarios, many medical equipment electromagnetic signals are not conducive to the operation of the fire protection system, the alarm detector anti-interference ability requirements are higher, so different scenarios have "custom fire" needs, the need for technology and practical experience combined, Blue Bird with long-term accumulation of Know-how, to provide customers with a variety of fire needs of supporting programs, in the processing of "custom fire" Absolute competitive advantage when it comes to problems.
The brand effect of Blue Bird has become increasingly prominent, and the authoritative selection of brand preference rate in 2020-2021 has ranked first in the industry for two consecutive years. From 2020 to 2021, the company's real estate developer fire facility brand preferred rate was 21% and 17%, respectively, ranking first in the industry, of which 2020 surpassed the bay for the first time. Product performance, quality and service and other elements are an important basis for customers to choose fire protection products, and the increase in brand awareness reflects the company's continuous improvement of comprehensive strength and highlights the brand effect.
3.2 Sales system: establish a monopoly distribution model, channel construction is unique
At the beginning of its establishment, the company determined the sales model based on distribution, and underwent three stages of change, focusing on expanding the scale of sales, improving channel control, and reducing sales costs. The three-stage change is mainly divided into: (1) "general distribution" model (2001-2003): Because the company is in the start-up stage, through the "general distribution" model, products can be quickly rolled out, the coverage area can be expanded, which is conducive to rapidly improving brand awareness and sales scale. (2) Office model (2004-2007): Under the background of the simultaneous improvement of the company's product strength and brand power, the company began to take the initiative to expand, setting up offices and subsidiaries in key cities across the country, aiming to strengthen channel control, improve sales scale and enhance revenue stability. (3) Monopoly distribution is the mainstay, direct sales are supplemented (2008-present): The company has gradually transformed the office into a company-operated dealer, and at the same time requires all general dealers to be converted into a monopoly distribution, which has the following characteristics: 1) outright sales, the company's payment return pressure is small, and the risk of commodity backlog is small; 2) regional restrictions, preventing channeling, and effectively protecting the dealers' operating income. 3) Exclusive monopoly, which helps to highlight the brand value.
Blue bird has stronger channel management capabilities and more optimized cost control capabilities, and the monopoly distribution model has more advantages. Fire protection products have a wide range of application scenarios (various types of places, buildings), the market is quite scattered, and end users have higher requirements for the after-sales service of consumer products, and the regional competition characteristics are obvious, so they rely on regional sales networks, agents and other channels. Compared with other leading companies in the fire protection products industry, Gulf Technology (foreign-funded) and Sanjiang Electronics, which cut into the market earlier, mainly adopt the direct sales model, and China Consumption Cloud adopts the "general distribution" model and cooperates with more than 500 distributors. We believe that the monopoly distribution model is relatively "general distribution", the ability to control the channel is stronger, the relative direct sales, the cost control effect is obvious, which is conducive to expanding the marketing radius, and at the same time, due to a series of economic and policy leading to the clearance of the industry, the optimization of the competitive pattern, the leadership position of Qingniao has become more and more stable.
Bluebird's monopoly distribution model optimizes the expense structure and improves profitability. Three representative companies of Qingniao, Zhongxuyun and Sanjiang Electronics were selected to compare the gross profit margin and sales costs by using monopoly distribution, general distribution and direct sales respectively. From the perspective of gross profit margin, from 2015 to 2019, the gross profit margin of Sanjiang Electronics was 43.76%, 44.43%, 45.97%, 43.57%, and 45.80%, which was always higher than that of Blue Bird and China Consumption Cloud, mainly because the company would incentivize dealers through sales rebates (equivalent to discounted discounts) under the distribution model, so the gross interest rate of the direct sales model was relatively low. According to the Blue Bird prospectus, after excluding the impact of rebates, in 2016-2018, the gross profit margin of Blue Bird was 53.68%, 53.35% and 49.63%, respectively, which was much higher than that of Sanjiang Electronics, mainly due to the scale effect of Blue Bird. From the perspective of sales expense ratio, the sales expense ratio of the direct sales model is significantly higher than that of the distribution model, from 2015 to 2019, the sales expense rate of Sanjiang Electronics was 18.9%, 21.0%, 22.2%, 23.6%, and 22.2%, respectively, while the sales expense rate of China Consumption Cloud was at the level of 10%-15%, and the blue bird was always below 10%. On the whole, Compared with Sanjiang Electronics, Qingniao has a low gross profit margin of about 2-3pct, but the sales expense ratio is about 10pct, in addition to the scale effect factor, it still reflects the stronger channel management ability and more optimized cost control under the Bluebird monopoly distribution model.
Elimination and support mechanisms are parallel, the number remains basically stable, and the proportion of large dealers is increasing year by year. In terms of incentives and support, the company fully mobilizes the enthusiasm of dealers through preferential sales settlement methods, payment collection cycles and rebates, and provides enhanced training, technical support, credit and other measures to support dealers' market development. At the same time, the company has set up a phase-out system, and for those whose performance has seriously declined and there is no appropriate reason, they will terminate the distribution contract relationship with them. According to the Blue Bird prospectus, from 2016 to 2018, the company eliminated 7 dealers, while developing 9 new dealers, the overall scale is stable at more than 60, and the annual sales scale of more than 40 million large dealers has increased year by year. Bluebird's sales model is stable and the mechanism is sound, and it is difficult for other competitors to quickly replicate its strong channel management capabilities, and Bluebird has formed a solid channel moat.
3.3 Differentiation: Self-developed "crested ibis" chip + embrace the trend of smart firefighting
The pattern of the fire protection industry has gradually changed from price-oriented to quality-oriented, and product differentiation will become a key means for the fire product market to open up the gap between echelons. The overall trend of the fire protection industry is: (1) the policy is becoming stricter: the National Development and Reform Commission in the "Industrial Structure Adjustment Guidance Catalogue (2011) (Amendment)", the fire alarm is listed as a restricted item, will be based on the principle of industrial structure optimization of the survival of the fittest, the policy for product management tends to be strict. (2) Industrial upgrading: the integrated development of fire protection, security and the Internet of Things, and the gradual evolution of smart fire protection have put forward higher requirements for product supporting capabilities and product strength, and industrial upgrading is the trend of the times. (3) Pattern optimization: After the new crown epidemic, the price of raw materials has risen, the operating pressure brought about by the cost side and the epidemic has accelerated the liquidation of small and medium-sized enterprises, and the industry competition pattern has been optimized. We believe that the industry as a whole has evolved into the middle and late stages of the growth period, evolving from price-oriented extensive competition to product-oriented quality competition, making differentiation an important means of competition for the company.
Bluebird product iteration is based on its mature research and development system. From the perspective of teamwork and commitment:
(1) Technical team: 2018-2020, Qingniao technical personnel were 319, 413, 532 people, accounting for 14.9%, 17.0%, 18.2%, respectively, year by year, of which more than 230 R & D team is mainly composed of young and middle-aged technical personnel, all from famous universities at home and abroad, comprehensive technical quality is high; compared with Sanjiang Electronics, as of the first half of 2020, there are 485 technicians, accounting for 27.2%, Andiel technicians are larger, but the proportion is relatively low.
(2) R & D investment: 2018-2020, Bluebird R & D investment was 0.93, 1.16, 138 million yuan, accounting for 5.2%, 5.1%, 5.5% of the total revenue, the company maintained high-intensity R & D investment, established UL anti-alarm experimental center, EMC electromagnetic compatibility laboratory, high and low temperature humid environment laboratory and other R & D laboratories, equipped with a variety of advanced equipment, R & D investment in 2019 for the first time more than 100 million scale, and continued to grow, 2018-2020 The three-year R&D investment CAGR reached 27.6%. Compared with Sanjiang Electronics, in 2019, the R&D investment was 0.59 billion yuan, accounting for 6.4% of the total revenue, and the R&D investment of Bluebird was larger, but the proportion was relatively low.
In terms of development trends, Qingniao's technical team and investment are steadily expanding, and the R&D system is mature; the personnel structure and investment scale of Sanjiang Electronics are still changing, indicating that the company's R&D system and even the overall business policy are in the process of continuous optimization.
The results of long-term high-intensity investment are remarkable, and the company's technical moat is constantly deepening. From 2000 to 2006, the initial stage of the company's establishment was mainly in the establishment of a fire alarm product lineage with the intellectual property system as the core; from 2006 to 2018, the company's core products were continuously upgraded, while expanding the multi-type fire monitoring system; since 2018, the company's technological leadership has become more and more obvious, a new generation of technology has been put into application, product performance is comparable to overseas high-end brands, and at the same time successfully developed fire-specific chips to strengthen differentiated competitiveness. We believe that the company's technical reserves are sufficient, and the technical advantages continue to appear in product improvement.
One of the important means of differentiation: the "crested ibis" chip opens up the performance gap.
Bluebird is the only manufacturer with the ability to design a dedicated chip for fire alarm system products, preventing Know-How spillage while achieving differentiated competition through technology iteration. As the first domestic fire alarm chip independently developed by Blue Bird, the "Crested Ibis" chip deepens the moat of the company's products from three angles:
(1) The special chip has a natural threshold from design, research and development to application: from the perspective of research and development, Blue Bird set up a professional R & D team that took 4 years to develop, labor costs, time costs, and high capital investment; from the application point of view, there needs to be enough shipments to form a scale effect, covering R&D and manufacturing costs, otherwise compared to the general-purpose MCU, there is no economic advantage, Blue Bird has formed more than 20 million shipments in 2016 (mainly used in detectors and other on-site components), and is expected to be achieved in 2020 More than 50 million pieces.
(2) Dedicated chips prevent technical spillover, which is conducive to product iteration: From the perspective of intellectual property protection, dedicated chips enable a large number of application scenarios accumulated by the company Know-how to be more effectively utilized at the same time, prevent technology spillover, flexibly adjust according to the needs of the application side, and facilitate product iteration and differentiation.
(3) Compared with the general MCU, the "crested ibis" chip has stronger performance and lower power consumption: in terms of performance, the main body now has strong anti-electromagnetic interference ability (RF electromagnetic field immunity reaches 30V/m, the industry standard is 10V/m), stronger load capacity can effectively reduce false alarms, high data bandwidth to achieve instant communication; in terms of power consumption, customized special chips have no redundancy, which can reduce power consumption and comprehensive costs.
The second important means of differentiation: embrace smart fire protection and vertically integrated development.
The core purpose of smart fire protection is remote operation and maintenance, response speed, accurate prevention and control, and after-the-fact traceability. Establish a smart fire service cloud platform based on the Internet of Things, adopt the Internet of Things technology, make full use of modern computers, communications, control and cloud computing, big data technology, expand the breadth and depth of fire management, and form a new and efficient service model that closely combines "anti-elimination integration" and "Internet of Things service", which can play an important role in fire early warning, fire prevention supervision, fire fighting and rescue, and maintenance of fire fighting facilities.
Judging from the number of patents, the company's research and development results, the number of software copyrights greatly exceeds that of companies in the same industry. In terms of invention patents, Qingniao and Sanjiang hold 16 and 24 respectively, and Qingniao has no obvious advantage in quantity, but focuses on core components and key performance; manifested in the application side, Qingniao has rich project experience, and can solve fire fighting difficulties in specific working conditions and scenarios in the field of "customized firefighting". In terms of software copyright, Qingniao and Sanjiang hold 202 and 75 items respectively, and Qingbird has significant software development advantages, and under the current industry trend of layout wisdom fire protection, the first-mover advantage is highlighted.
With the software technology development gene, through continuous innovation, the coordinated development of software and hardware has laid a first-mover advantage for the company in the era of smart fire protection. At the beginning of its establishment, Blue Bird began to support software and algorithms for its own products, with strong software development and algorithm upgrade capabilities; in 2020, the breakthrough of artificial intelligence analysis algorithms in the field of visualization means that the company has built a relatively complete perception layer in the framework of the integrated system of consumer security to achieve the acquisition of data and image information. Based on the development trend of the industry, Qingniao has established its own intelligent fire protection platform (Qingniao Fire Cloud), which has achieved a breakthrough in the application layer of the integrated system architecture of consumer safety, integrated the collected data, and realized the networking and intelligence of the equipment. From this point of view, intelligent fire protection system is emerging, the dependence on software will be strengthened year by year, and Blue Bird has already possessed the first-mover advantage of the intelligent fire fighting era.
3.4 Endogenous and epitaxial two-way development, multi-field + multi-brand layout to consolidate competitive advantages
Through the two-way development of epitaxial and endogenous, the company has gradually built a "3+2" business framework: with general fire alarm business, emergency lighting and intelligent evacuation business and industrial fire protection business as the core, it actively lays out smart fire protection, household fire protection and other related fields. On the one hand, the company adheres to high-intensity R&D investment, attaches importance to team building, and continuously upgrades and iterates products; on the other hand, the company enriches product categories, increases production capacity and expands channels through foreign investment, and continues to improve the multi-field layout of the fire protection industry and create a multi-brand dimension. At present, the company's fire alarm business is mainly based on the "Blue Bird" and "Long-ago" brands, and the evacuation business has built a multi-brand system of "Blue Bird", "Zhongke Zhichuang" and "Left-oriented", and the "Kiss Win" brand has been created in the household field. The company's measures of extended endogenous two-way development are conducive to fully developing competitive advantages and improving market share.
While the business framework is perfect, the company's diversified brand pattern has achieved deep coverage of multi-level and multi-regional markets. Specifically: (1) Multi-brand coverage of multi-level markets to respond to the diversified needs of customers. The company has a "Blue Bird" series facing the high-end market, benchmarking international first-line brands such as Siemens and Honeywell, as well as a "long-term" series for the low-end market, focusing on high cost performance. (2) Multi-brand to strengthen the radiation of overseas markets. In 2020, the FireWatcher series cultivated in-house by Blue Bird was certified by FM (the American Factory Mutual Insurance Research Center, whose certificate and test report are universally recognized worldwide), marking that the products developed by the company have passed the international high standard of testing and can meet the needs of the international high-end market. Founded in 2011 in 2011, the company aims to open up the international market, currently has 22 UL/ULC certificates (North America) and 14 CE certificates (Europe), and in 2020 it holds French Finsecur SAS, and its core products have obtained a number of NF (French certification standard) and CE (European certification standard) qualification certificates, with more than 50 authorized patents. (3) Multi-brand is conducive to rapid business expansion. "Long ago" brand deep ploughing in the southwest region for many years, brand influence deeply rooted in the hearts of the people, "left lighting" also has a certain degree of brand recognition, Blue Bird united many brands, including "Crested Ibis" chip including technical support, and multi-brand for Blue Bird to expand its influence in the regional market, to achieve a win-win situation. (Source: Future Think Tank)
<h1 class="pgc-h-arrow-right" data-track="42" >4 Income elasticity enhancement, profitability improvement, and industrial demand upgrading are flying in tandem</h1>
4.1 One of the catalysts: inject more revenue elasticity into emerging business areas
Bluebird Fire's emerging business areas are mainly concentrated in the emergency evacuation market and the industrial industry market. (1) Emergency evacuation market: The policy outlet prompts the emergency evacuation market to enter a period of rapid development. (1) Emergency evacuation becomes an independent category and is forced to install, opening up a new market space. In March 2019, the Ministry of Housing and Urban-Rural Development's "Technical Standards for Fire Emergency Signs and Evacuation Instruction Systems" clearly required that centralized control emergency evacuation systems should be installed for places where fire control rooms are set up; in April 2020, the State Administration of Market Supervision optimized the mandatory product certification catalog, and fire emergency lighting and evacuation instruction products became independent categories. The relevant policies for emergency evacuation products have been continuously introduced, making them mandatory certification as independent categories, and at the same time realizing binding and matching with fire alarm systems. (2) Intelligent development promotes the increase of product value. On the basis of the traditional "nearby evacuation" principle, the emergency evacuation system has improved the requirements for safety and reliability, and it is necessary to guide it correctly according to the fire situation, so the intelligent emergency evacuation system will continue to innovate in specific applications. According to Zhiyan Consulting, in 2019, the market space of China's emergency evacuation system was about 5.9 billion, an increase of 13.46% year-on-year. With the expansion of space and the increase of value, it is expected that the market size will reach 20-30 billion in the next 3 years.
The company laid out the field of intelligent emergency evacuation in advance and seized market opportunities. In 2017, the company formally laid out the field of emergency lighting and intelligent evacuation by increasing the capital of Zhongke Zhichuang; in 2021, it acquired 25.37% of the equity of Shanghai Konka Green Lighting Technology Company to further strengthen the production capacity and product quality of emergency evacuation products; at the same time, indirectly invested in left-facing lighting, and further expanded production capacity and regional coverage through in-depth cooperation through cross-shareholding. At present, the company carries out business under the brands of "Zhongke Zhichuang" and "Left-oriented", and in the future, the company is also considering entering the "Blue Bird" and "Long-term" brands into the intelligent evacuation market. In 2020, the company's emergency evacuation system business achieved about 180 million revenue in 2020, with a year-on-year growth rate of 177.2%, gross profit margin of 33.2%, +10.4pct year-on-year, CAGR reached 150% in the past four years, accounting for 0.36% of total revenue increased from 0.36% to 7.14%, achieving leapfrog development. Due to the basic overlap between the application field of the emergency evacuation system and the fire alarm system, we expect that in the context of the policy outlet, the superposition of the company's channel advantages can form an effective cross-sale, and the emergency evacuation business will officially enter the growth outbreak period, while the scale effect will gradually appear, and the gross profit margin is expected to continue to increase.
(2) Industrial market: The company attaches great importance to the development of the industrial field, and starts from the product system, personnel and channels to carry out a comprehensive layout. From the perspective of revenue, the company's current products in the industrial field are gas detection and gas fire extinguishing systems, which are supplied by subsidiaries Weitai Safety and Zhengtianqi respectively, and have not yet involved fire alarm systems. At present, the company has mainly made the following three aspects of layout in the industrial field: (1) the basic construction of the product system is completed, providing fire safety products and overall solutions for the fire protection system. On the one hand, thanks to the development and technical reserves of the company's "crested ibis" chip, it has launched a temperature-sensitive cable with differential temperature function, an infrared/ultraviolet/composite flame detector with self-test function, a graphic detector and other products; on the other hand, the company will introduce related products to open up the industrial fire market and the high-end product market through the acquisition of French FINSECUR. (2) Establish the Industrial Products Division and complete the team building. Different solutions can be launched for different industries, such as the rail industry is dominated by temperature-sensitive cables, and the petroleum and petrochemical industry is mainly based on combustible gas detection. (3) Through channel construction, enter the product library of large enterprises. In the first half of 2021, the company won the bid for the relocation project of Hebei Tianzhu Iron and Steel Group and the green fine steel project of Zhongtian Iron and Steel, which are the only suppliers of a full range of automatic fire alarm system products, in addition to the construction of Tangshan Iron and Steel Group Huaxi Special Steel Relocation Project, Masteel (Wuhan) Company New Factory Project, Luzhong Metallurgical Mining Fire Protection Renovation Project, Laiwu New Iron Ore Transformation Project, etc., the company has achieved a breakthrough from 0 to 1 in the field of fire alarm industry.
With the breakthrough in the industrial field, the optimization of customer structure will promote the company's gross profit margin. 2011-2020, the gross profit margin of the gas detection system increased from 10% to 53.8%, which we believe is driven by the increase in customers in the industrial field, indicating that the company has a certain accumulation of customers in the industrial field, but compared with Sino Analytica Environment (mainly producing various gas detectors used in the petroleum chemical field) and Yijie shares (mainly engaged in various types of industrial flames, gas detectors and alarm control systems), both gross profit margins can be maintained at more than 60%, and the gross profit of the Blue Bird industrial business is still above 60%. The rate still has a lot of room for improvement. We believe that based on the continuous accumulation of customer resources, the breakthrough of high-margin fire alarm system products in the industrial field will expand the company's revenue scale on the one hand, and help to improve the company's overall gross profit margin on the other hand.
4.2 The second catalyst is to give full play to its own advantages and repair profits
The main concern of the market is that Bluebird is more dependent on channel dealers, blindly expanding the scale of sales through rebate incentives, which will cause a situation of increasing revenue without increasing profits, but after our research, the decline in profitability of Bluebird has mainly occurred in the past three years, which is the result of the joint action of internal and external factors; and the current conditions are ripe, and the company's profitability is about to be repaired.
From the perspective of compound growth rate, the weakening of profit elasticity mainly occurred between 2017 and 2020. From 2011 to 2020, the company's revenue scale increased from 298 million yuan to 2.525 billion yuan, and the net profit margin attributable to the mother increased from 0.53 billion yuan to 430 million yuan, and the CAGR of the two was 26.78% and 26.22% respectively, and the overall revenue and profit elasticity were basically flat. From a phased point of view, between 2011 and 2017, the 6-year CAGR of revenue and attributable net profit was 30.5% and 35.2%, respectively, and between 2017 and 2020, the 3-year CAGR of revenue and attributable net profit was 19.6% and 10.0%, respectively, and the elasticity of profit growth obviously turned from strong to weak.
From the perspective of the growth rate after deducting non-deductions, the profit growth rate in 2018-2020 is not as fast as the revenue growth rate in the same period. From 2018 to 2020, the revenue growth rate was 20.5%, 27.8%, and 11.2%, the growth rate of net profit attributable to the mother was 6.56%, 5.28%, and 18.72%, respectively, and the profit growth rate in 2020 rebounded significantly and exceeded the revenue growth rate in the same period, mainly due to the non-recurring profit and loss of the year of 0.55 billion yuan (mainly for the immediate refund of value-added tax and various government subsidies), and the net profit growth rate of the mother after deduction of non-profit in the past three years was 10.66%, 7.01%, and 3.29%, respectively. Both are lower than the revenue growth rate in the same period.
From the perspective of per capita income generation and profit generation, the company's profit efficiency declined from 2018 to 2020. From 2011 to 2020, the total number of employees of the company increased from 740 to 2918, maintaining continuous growth; per capita income generation increased from 403,200 yuan to 865,200 yuan, and achieved 933,100 yuan / person in 2019, which was a historical high, and fell for the first time in 2020; the average profit increased from 71,500 to 147,400, a historical high in 2017, achieving 177,400 yuan / person, and declining for three consecutive years in 2018-2020.
On the whole, the company has entered a trough of profitability in the past three years. We believe that the decline in the company's profitability is due to multiple internal and external factors such as intensified price competition in the industry, changes in product structure, increased investment in new business, large amortization of equity incentives, and provisions for impairment losses. (Source: Future Think Tank)
Factor 1: The intensification of price competition has led to a decline in the company's gross profit margin. We believe that with the optimization of the future pattern, the market competition will continue to improve, and the company's gross profit margin is expected to rise. Affected by the intensification of price competition in the industry in 2018-2019, the company's gross profit margin fell from 43.9% to 39.6%, a decline of 4.3pct in two years, and the gross profit margin of general fire alarm products in the core business fell by 5.4pct. However, price competition has accelerated the clearance of the industry, and at the same time, in the medium and long term, the shortage of chips has shown a normalized trend, which will further optimize the industry pattern, the market share will be concentrated in the head, the price is no longer the main means of competition for the head manufacturers, and the market competition will gradually improve. At the company level, the cost reduction effect of the self-developed "crested ibis" chip gradually appears with the expansion of the scale of shipments, while strengthening the cost control of production and procurement integration, we expect the company's overall gross profit margin to stabilize and recover, which can maintain a dynamic stability of about 40%, 38.80%, 38.92% and 39.20% in 2021-2023, respectively.
Factor two: The rapid growth of the emergency evacuation business has led to changes in product structure, resulting in a decline in gross profit margin. We believe that in the future, the company's product structure will be further optimized to promote the improvement of gross profit margin. The company's emerging emergency evacuation business has maintained rapid growth since 2017, its revenue proportion has increased from 0.18% in 2017 to 7.14% in 2020, and the gross profit margin is 36%, 29%, 23%, 33%, which is lower than the company's overall gross profit margin level, and it is expected that the future endogenous epitaxial two-way drive the rapid growth of the company's emergency evacuation sector, the proportion of revenue in the next three years is expected to reach 20%, and the gross profit margin center is expected to increase to 35%. From 2021 to 2023, the optimization of the company's product structure will benefit from breakthroughs in the field of high-margin industries on the one hand, and the proportion of revenue in the next three years is expected to exceed 3%, and the gross profit margin is expected to reach more than 60%; on the other hand, there are structural opportunities in the field of general fire alarm, which is expected to promote the scale effect of the company's supporting systems such as electricity, power supply, and residual pressure, and support the overall gross profit margin level.
Factor three: the investment in the layout of new business in the early stage is large, and the sales and research and development expense rates are increased. We believe that the company has basically completed the new business layout at present, deepened the reform of the management system in the future, promoted cost reduction and efficiency through refined operation management, increased per capita output, and has a large space for optimization of the expense rate. From 2017 to 2020, the expense ratios for the period were 17.87%, 18.10%, 19.49% and 21.49%, respectively, an increase of 3.62pct, of which the sales, management, research and development, and financial expense ratios increased by 1.04pct, 1.47pct, 0.96pct, and 0.16pct, respectively. Based on the needs of layout development, the company has made early investment, while maintaining the intensity of research and development, strengthening brand and channel construction, and increasing the introduction of personnel. In terms of new products, product development in new subdivisions has been completed, including emergency evacuation, industrial fire protection, smart fire protection platform, household fire protection, and integration of safety and consumption (image application product line), etc.; in terms of personnel, the total number of employees increased from 2135 at the end of 2018 to 2918 at the end of 2020, an increase of 37%, production, sales, technology, and management personnel increased by 37%, 23%, 67%, 39% respectively, and the new personnel mainly include direct sales teams, research and development personnel, industrial fire teams, etc. In view of the company's emphasis on product research and development and continuous upgrading, we expect that from 2021 to 2023, the company's R&D expense rate will maintain a steady growth rate of 5.55%, 5.66% and 5.77% respectively, and the sales expense ratio is expected to gradually improve in 2022, with 10.41%, 10.20% and 9.90% respectively.
Factor 4: Approximately 67% of equity incentive expenses were amortized in total 2020-2021. We believe that management expenses are the core of the company's internal control, and after the completion of large amortization in 2021, the cost pressure will be greatly alleviated. The Company has amortized the expenses of the first tranche of the equity incentive plan since 2020, and according to the announcement, the total fees for granting restricted stock options and shares are about 106 million, and the amortizations from 2020 to 2022 are 0.27, 0.45 and 0.25 billion, accounting for 25%, 42% and 24% respectively. We believe that after a large amortization in 2021, the company's expense pressure will be significantly alleviated after 2022, and the management expense ratios are expected to be 6.8%, 5.8% and 5.2% in 2021-2023, respectively.
Factor five: The large credit impairment in 2018-2020 pulled down the company's profit level by about 1.7pct.
We believe that strengthening the management of the account period is an important means for the company to maintain the profit level in the future, and the risk of bad debt loss is controllable as a whole. As the company's accounts receivable continue to expand with the scale of the business, the impairment loss increases accordingly. From 2011 to 2020, the company's accounts receivable increased from 0.32 billion yuan to 1.3 billion yuan, accounting for 35.4% of current assets from 14.3%, so in 2018-2020, the company recorded large asset and credit impairment losses, which were 0.31, 0.39 and 0.45 billion yuan, accounting for about 1.7%, 1.7% and 1.8% of revenue, respectively, the vast majority of which were bad debt losses on accounts receivable. In the company's "distribution-oriented, direct sales as a supplement" sales model, although the proportion of direct sales has increased in recent years, distribution in 2020 still contributes more than 70% of the revenue, payment collection is an important performance assessment indicator for dealers, most of the company's dealers are long-term cooperation, there is a solid credit foundation, the possibility of bad debts is small; in terms of direct sales, the company will continue to strengthen the management of the account period, and the risk of bad debt losses is controllable.
On the whole, the certainty of the company's profitability in the future is high, and the profit repair is imminent. From the perspective of comparable companies, from 2017 to 2019, the net interest rate of Blue Bird is 15.50%-21.78%, the net interest rate of Sanjiang Electronics is 8.19%-10.06%, the net interest rate of China Cloud is 11.45%-14.30%, and the net interest rate of Blue Bird can maintain more than 15% is mainly reflected in the company's comprehensive competitiveness, and the net interest rate of another head enterprise, Sanjiang Electronics, is expected to have a lower profit level of other small and medium-sized enterprises in the industry. The expansion stage of the industry scale is accelerated through price competition, and there is little room for the future profitability to be further squeezed, and alpha attributes will be amplified in the industry competition.
Looking forward to the future, the company's new business early investment results are expected to begin to appear in 2022, cost and expense management is gradually optimized and strengthened, 2021-2023 net interest rate level is expected to be 12.8%, 14.0%, 15.1%, respectively; according to the financial model calculation, the company's total asset turnover ratio is expected to remain above 0.7, the asset-liability ratio is expected to remain about 30%, ROE level is gradually recovered, 2021-2023 is expected to be 12.8%, 15.7%, 18.2%, respectively.
4.3 The third catalyst factor: the development of electric vehicles and energy storage associated with fire hazards, is expected to force fire management policies to increase and industrial upgrading
The development of electric vehicles and energy storage is associated with fire hazards, which is expected to force fire management policies to increase and industrial upgrading. According to the data of the Fire Rescue Bureau, in 2020, China received a total of 252,000 fires and direct property losses of 4.009 billion yuan; fires caused by electrical appliances accounted for 25.1%, ranking first. At present, the penetration rate of electric vehicles and other electric devices in China has increased, the number of new energy vehicles in the whole society is approaching 5 million, and vicious fire incidents such as indoor charging of electric vehicles, spontaneous combustion of new energy vehicles, and lithium battery failure explosions are frequent, which has aroused great concern in society.
At the same time as the development of the lithium battery industry, its thermal runaway problem has become one of the main hidden dangers of fire safety. Siemens, Honeywell and other overseas companies have begun to lay out the prevention of lithium battery thermal runaway phenomenon, such as Siemens launched the FDA241 air sampling detector, and Honeywell launched the li-ion tamer escape gas monitoring system, both of which can monitor the battery condition, by detecting the thermal runaway phenomenon of escape gas to achieve early warning, with follow-up power outages and gas fire extinguishing and other means, effectively improve the safety of lithium battery storage systems. The layout of overseas enterprises in the field of energy storage will open up a greater imagination space for the future product upgrade of Qingbird Fire.
For the fire early warning pain points of emerging scenarios such as electric vehicles and energy storage, Blue Bird proposed targeted solutions. (1) Based on the fire hazards of indoor charging of electric vehicles, the company developed and launched the "smart cloud box" product, which is a concentrated manifestation of the integration of consumer safety and materials. It is based on Internet of Things technology, configured with cameras and AI algorithms, and connected with the Bluebird Fire Cloud Platform, so as to achieve real-time monitoring, rapid viewing, timely transmission, to achieve early detection, early alarm, early disposal, and eliminate the risk of fire expansion. (2) For the energy storage power station, Qingniao gave an overall solution of detection and fire extinguishing.
In the early warning stage, the combustible gas alarm system, pyrolysis ion detector and suction air sampling detector are configured, which are linked with the battery management system BMS; in the extinguishing stage, the combined fire extinguishing system of heptafluoropropane + fine water mist is adopted to achieve the purpose of extinguishing open flames, inhibiting re-ignition, and reducing fire losses. The customers of the above solution services mainly include cabinets/cabinet suppliers and head integration enterprises such as Sunshine Power, and have realized a number of landing projects, such as Guodian Huairou Science City Project, Jutong Energy Storage Cabinet Project, Zhejiang Jiaotong Energy Storage Project, etc.
(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]. Future Think Tank - Official website