Hengli Hydraulics (601100): Import of hydraulic parts leading to replace the benefits of the pump valve of the excavator

Hengli Hydraulics (601100): Import of hydraulic parts leading to replace the benefits of the pump valve of the excavator

1. Hengli Hydraulics is the leading domestic hydraulic component manufacturer, and actively expands from oil cylinders to pump valves.

The company’s main excavator special oil cylinders, non-standard oil 杭州夜网论坛 cylinders and hydraulic pump valves, 2018 revenue accounted for 43% / 27% / 11% respectively.

The company’s top five customers are Sany, XCMG, Caterpillar and other domestic and foreign engineering machinery leaders, and China Central Railway, China Railway Construction and other central enterprises.

In the past 3 years, the compound growth rate of revenue was 57%, and the compound net profit compound growth rate was 136%; in the past 10 years, the compound compound growth rate was 29%, and the compound net profit compound growth rate was 25%.

2. China’s hydraulic market space is about 60 billion yuan, with low-speed growth, dominated by overseas brands, and large import substitution space.

The global industry giants are Bosch Rexroth, Kawasaki Heavy Industries, Eaton, etc. Kawasaki Heavy Industries currently has a market share of more than 50% in China’s high-value digging hydraulic pump valves.

The annual import value of hydraulic products exceeds 10 billion U.S. dollars, and most foreign brands have established production bases in China, and there is ample room for import substitution.

To benchmark overseas leaders, Hengli Hydraulics has a competitive advantage in terms of profitability, operation and production efficiency.

3. Oil cylinder plate: The excavator oil cylinder has entered a low-speed growth stage, and the competition in the non-standard oil cylinder market space is scattered, which is expected to become a new growth point.

1) The market space for Indian excavator cylinder installation is approximately 3.8 billion, and the company’s market share exceeds 50%.

It is expected that the sales volume of excavators will enter a stable growth stage, but the domestic market share of domestic brands will continue to increase to promote the company’s cylinder share. It is expected that the revenue growth rate for 2019-2021 will be 12% / 2% / 1%.

2) The global non-standard oil cylinder market space is about 34 billion yuan, with widespread downstream applications and scattered competition.

With the continuous penetration of high-altitude operation platform cylinders in North America and China and the trend of the growth trend of shield machine cylinders, it is expected that the revenue of non-standard cylinders will increase by 25% / 19% / 18% in 2019-2021.

4. Pump and valve plate: Entering the heavy-duty period, the market share and profit rate have increased rapidly.

The domestic market space for front-loading of pumps and valves for domestic excavators is about 5.2 billion. The market share of Kawasaki ‘s digging market is more than 50%. The company ‘s product performance and profitability are not lost to Kawasaki.

The market size of Hengli hydraulic pump and valve is rapidly increasing. It is expected that the compound valve revenue will increase 66% in the next 3 years. At the same time, the scale effect will bring about a change in gross profit margin. It is expected that the gross profit margin will reach 40% in the next 2-3 years.

Investment suggestion As a domestic leader in hydraulic components, the heavy volume of excavator pump and valve business in the short term will bring high performance growth. The medium and long-term company will continue to develop in the field of non-engineering machinery, and continue to expand into a comprehensive manufacturer of high-end hydraulic equipment.Import substitution.

Estimated net profit for 2019-2021.

0/15.

2/18.

30,000 yuan, a ten-year growth of 43% / 28% / 20%, a three-year compound growth of 30%.

The EPS is 1.

35/1.

73/2.

07 yuan, corresponding to 21/17/14 times the PE.

Segment estimate: The oil cylinder gives 15 times PE to the benchmark overseas leader, with a market value of 14.4 billion; the net profit of pump and valve in 2019-2021 will increase by 206% / 65% / 42%, and it will give 65 times PE in 2019, with a market value of 15.4 billion USD, totaling 298Trillion, corresponding to 34 yuan, 25 times PE in 2019, “Buy” rating.

Risks remind that excavator sales are lower than expected; pump valve volume is lower than expected; changes in raw material prices; individual quarterly results have fallen short of expectations.