汇丰银行-中国-机械行业-中国电梯业：分歧的出现和改造加快-2019.8.15-23页.pdf

Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:The Hongkong and Shanghai Banking Corporation Limited View HSBC Global Research at:https:/ THIS CONTENT MAY NOT BE DISTRIBUTED TO THE PEOPLES REPUBLIC OF CHINA(THE PRC)(EXCLUDING SPECIAL ADMINISTRATIVE REGIONS OF HONG KONG AND MACAO)MNCs are increasing prices and buying more domestic components,accelerating consolidation at the component and OEM levels Elevator retrofit market taking off before the after-sales maintenance market does,given substantial government subsidies Preferred stocks are Inovance and SMEIC,both rated Buy;maintain Reduce on Canny and STEP M&A at the component and OEM levels:After several years of market consolidation with lower demand for new elevator installations and weak pricing power,elevator makers have begun to leverage property developers market share gains to boost sales.Lower profitability has strengthened this consolidation trend;Hitachi(6501 JP,CMP JPY3,676,not rated)announced the acquisition of 28%of Yungtay(1507 TW,CMP TWD 64.50,not rated)in April.This year,we have seen diverging pricing strategies adopted by domestic and foreign elevator makers.Domestic players are still under pressure to cut prices annually to maintain new elevator installation growth,hoping to obtain future maintenance orders.However,some multinational corporations have already increased prices in China and have begun to procure more components from local producers to maintain their profitability.Inovances(300124 CH,RMB22.41,Buy)acquisition of BST(private)in April 2019 should help it provide a highly complementary product to elevator makers in terms of a one-stop solution for elevators electronic components.Elevator retrofit market taking off:Since March 2019,there have been some positive government policies to encourage the installation of elevators for the regeneration of old residential areas.Over 10,000 elevators(c1.5%of 2018 total production)were installed last year in such areas.In 1H19,there were at least 363 elevator retrofit projects with a total value of cRMB795m;government-subsidized and old residential housing accounted for c33%or cRMB260m.According to the China Elevator Association,rough demand for elevators in the retrofit market could reach c5m units,and at least 2m units if housing that is unable to install elevators,eg it is too old,is taken into account.The association estimates the market size at RMB1trn.We estimate the market for elevator retrofit in China is at least RMB0.35trn.Preferred picks Inovance and SMEIC:Maintain Buy and TP of RMB34.00 on Inovance and Buy on SMEIC with higher TP of RMB22 from RMB20,as this state-owned enterprise is a main beneficiary of the China elevator retrofit markets growth.Reiterate Reduce on Canny with a higher TP of RMB6.20 from RMB3.50 based on the recovery of last years new instalment weakness.Maintain Reduce on STEP with a lower TP of RMB4.00 from RMB4.70 because operating cash flow turned negative.Summary of ratings,target prices and estimate changes Current price _ Target price _ _ Rating _ Upside/downside Market cap(USDm)_ EPS change _ Company Ticker Currency Old New 2019e 2020e 2021e Canny Elevator 002367 CH RMB 7.53 3.50 6.20 Reduce-18%850-76%-61%NA SMEIC 600835 CH RMB 19.34 20.00 22.00 Buy 14%2,799-16%-3%NA STEP 002527 CH RMB 4.69 4.70 4.00 Reduce-15%412-229%-166%NA Inovance 300124 CH RMB 22.41 34.00 34.00 Buy 52%5,270 NA NA NA Source:Wind,Bloomberg,HSBC estimates.Priced at close of 13 August 2019.NA Not applicable.15 August 2019 Helen Fang*Analyst,Robotics and Automation The Hongkong and Shanghai Banking Corporation Limited .hk+852 2996 6942 Anderson Chow*Global Co-Head of Industrials Research The Hongkong and Shanghai Banking Corporation Limited .hk+852 2996 6669 Edward Perry*Analyst HSBC Bank plc +44 20 7991 8415 *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations China Elevator Equities Machinery China Divergence emerging and retrofitting picking up Equities Machinery 15 August 2019 2 Financial statements Year to 12/2018a 12/2019e 12/2020e 12/2021e Profit&loss summary(CNYm)Revenue 3,515 4,297 5,319 6,635 EBITDA-171-131-82-42 Depreciation&amortisation-69-56-48-44 Operating profit/EBIT-240-187-131-86 Net interest-85-126-175-209 PBT-242-197-165-189 HSBC PBT-242-197-165-189 Taxation-53 61 49 57 Net profit-261-120-102-117 HSBC net profit-261-120-102-117 Cash flow summary(CNYm)Cash flow from operations 38 187 259-56 Capex-165-189-234-292 Cash flow from investment-997-189-234-292 Dividends-111 0 0 0 Change in net debt 604 3-25 349 Balance sheet summary(CNYm)Intangible fixed assets 1,446 1,424 1,403 1,384 Tangible fixed assets 514 300 138 37 Current assets 4,436 4,450 4,703 4,945 Cash&others 1,099 730 413-192 Total assets 6,627 6,405 6,475 6,596 Operating liabilities 1,374 1,655 2,181 2,692 Gross debt 1,957 1,591 1,249 992 Net debt 858 861 836 1,185 Shareholders funds 2,659 2,539 2,437 2,321 Invested capital 3,462 3,342 3,241 3,124 Ratio,growth and per share analysis Year to 12/2018a 12/2019e 12/2020e 12/2021e Y-o-y%change Revenue 3.3 22.3 23.8 24.7 EBITDA-163.9 Operating profit-219.4 PBT-220.2 HSBC EPS-290.9 Ratios(%)Revenue/IC(x)1.0 1.3 1.6 2.1 ROIC-7.5-3.6-3.1-3.7 ROE-9.8-4.7-4.2-5.0 ROA-3.9-1.9-1.6-1.8 EBITDA margin-4.9-3.0-1.5-0.6 Operating profit margin-6.8-4.3-2.5-1.3 EBITDA/net interest(x)Net debt/equity 26.5 27.7 28.0 41.5 Net debt/EBITDA(x)-5.0-6.6-10.1-28.2 CF from operations/net debt 4.5 21.7 31.0 Per share data(CNY)EPS Rep(diluted)-0.42-0.19-0.16-0.19 HSBC EPS(diluted)-0.42-0.19-0.16-0.19 DPS 0.07 0.00 0.00 0.00 Book value 4.28 4.09 3.93 3.74 Valuation data Year to 12/2018a 12/2019e 12/2020e 12/2021e EV/sales 1.2 1.0 0.8 0.7 EV/EBITDA nm nm nm nm EV/IC 1.2 1.2 1.3 1.4 PE*nm nm nm nm PB 1.1 1.1 1.2 1.3 Dividend yield(%)1.5 0.0 0.0 0.0*Based on HSBC EPS(diluted)Issuer information Share price(CNY)4.69 Free float 42%Target price(CNY)4.00 Sector Machinery Reuters(Equity)002527.SZ Country China Bloomberg(Equity)002527 CH Analyst Helen Fang Market cap(USDm)413 Contact+852 2996 6942 ESG metrics Environmental Indicators 12/2018a Governance Indicators 12/2018a GHG Intensity(kg/USD)NA No.of board members 7 Energy Intensity(kWh/USD)NA Average board experience(years)NA CO2 reduction policy No Female board members(%)0 Social Indicators 12/2018a Board members Independence(%)43 Employee costs as%of sales NA Employee turnover(%)NA Diversity policy No Source:Company data,HSBC Price relative Source:HSBC Note:Priced at close of 13 Aug 2019 2.904.906.908.9010.9012.9014.902.904.906.908.9010.9012.9014.90201720182019Shanghai Step ElectricRel to CSI 300 IndexFinancials&valuation:Shanghai Step Electric Reduce 3 Equities Machinery 15 August 2019 Financial statements Year to 12/2018a 12/2019e 12/2020e 12/2021e Profit&loss summary(CNYm)Revenue 21,234 24,862 28,738 32,823 EBITDA 2,580 2,482 2,696 2,887 Depreciation&amortisation-227-137-153-172 Operating profit/EBIT 2,353 2,345 2,542 2,715 Net interest 266 252 271 286 PBT 2,426 2,432 2,647 2,841 HSBC PBT 2,426 2,432 2,647 2,841 Taxation-290-291-317-340 Net profit 1,268 1,274 1,463 1,633 HSBC net profit 1,268 1,274 1,463 1,633 Cash flow summary(CNYm)Cash flow from operations 188 1,413 1,429 2,059 Capex-264-396-458-523 Cash flow from investment 1,246-396-458-523 Dividends-1,420-452-519-579 Change in net debt 1,208-565-452-957 Balance sheet summary(CNYm)Intangible fixed assets 362 347 332 318 Tangible fixed assets 2,207 2,309 2,431 2,570 Current assets 28,450 30,913 33,495 36,231 Cash&others 13,209 13,775 14,226 15,183 Total assets 33,662 36,212 38,900 41,761 Operating liabilities 20,232 21,093 21,970 22,909 Gross debt 39 39 39 39 Net debt-13,170-13,736-14,187-15,144 Shareholders funds 10,804 11,626 12,570 13,624 Invested capital 11,180 12,002 12,946 14,000 Ratio,growth and per share analysis Year to 12/2018a 12/2019e 12/2020e 12/2021e Y-o-y%change Revenue 9.1 17.1 15.6 14.2 EBITDA-9.8-3.8 8.6 7.1 Operating profit-10.4-0.3 8.4 6.8 PBT-10.2 0.3 8.8 7.3 HSBC EPS-8.8 0.5 14.8 11.6 Ratios(%)Revenue/IC(x)2.0 2.1 2.3 2.4 ROIC 11.3 10.6 11.3 11.7 ROE 11.7 11.0 11.6 12.0 ROA 3.8 3.5 3.8 3.9 EBITDA margin 12.1 10.0 9.4 8.8 Operating profit margin 11.1 9.4 8.8 8.3 EBITDA/net interest(x)Net debt/equity-100.3-92.7-85.3-81.6 Net debt/EBITDA(x)-5.1-5.5-5.3-5.2 CF from operations/net debt Per share data(CNY)EPS Rep(diluted)1.24 1.25 1.43 1.60 HSBC EPS(diluted)1.24 1.25 1.43 1.60 DPS 0.44 0.44 0.51 0.57 Book value 10.56 11.37 12.29 13.32 Valuation data Year to 12/2018a 12/2019e 12/2020e 12/2021e EV/sales 0.1 0.1 0.1 0.1 EV/EBITDA 0.8 1.0 1.0 0.9 EV/IC 0.2 0.2 0.2 0.2 PE*15.6 15.5 13.5 12.1 PB 1.8 1.7 1.6 1.5 Dividend yield(%)2.3 2.3 2.6 2.9*Based on HSBC EPS(diluted)Issuer information Share price(CNY)19.34 Free float 39%Target price(CNY)22.00 Sector Machinery Reuters(Equity)600835.SS Country China Bloomberg(Equity)600835 CH Analyst Helen Fang Market cap(USDm)2,216 Contact+852 2996 6942 ESG metrics Environmental Indicators 12/2018a Governance Indicators 12/2018a GHG Intensity(kg/USD)na No.of board members 9 Energy Intensity(kWh/USD)na Average board experience(years)na CO2 reduction policy No Female board members(%)44 Social Indicators 12/2018a Board members Independence(%)33 Employee costs as%of sales na Employee turnover(%)na Diversity policy No Source:Company data,HSBC Price relative Source:HSBC Note:Priced at close of 13 Aug 2019 11.0016.0021.0026.0011.0016.0021.0026.00201720182019Shanghai Mech&ElecRel to CSI 300 IndexFinancials&valuation:Shanghai Mech&Elec Buy Equities Machinery 15 August 2019 4 Financial statements Year to 12/2018a 12/2019e 12/2020e 12/2021e Profit&loss summary(CNYm)Revenue 3,092 4,151 4,541 5,045 EBITDA 141 141 163 183 Depreciation&amortisation-125-112-112-114 Operating profit/EBIT 16 30 51 68 Net interest 0 1 1 5 PBT 13 27 49 67 HSBC PBT 13 27 49 67 Taxation 2 4 7 9 Net profit 16 33 59 80 HSBC net profit 16 33 59 80 Cash flow summary(CNYm)Cash flow from operations 352 137 658 723 Capex-52-159-174-194 Cash flow from investment 213-159-174-194 Dividends-599-8-15-20 Change in net debt 56 30-469-509 Balance sheet summary(CNYm)Intangible fixed assets 214 202 192 181 Tangible fixed assets 1,427 1,326 1,239 1,168 Current assets 3,692 4,055 4,606 5,245 Cash&others 203 173 641 1,151 Total assets 5,508 5,759 6,212 6,771 Operating liabilities 2,220 2,449 2,860 3,363 Gross debt 0 0 0 0 Net debt-203-173-641-1,151 Shareholders funds 3,154 3,179 3,223 3,283 Invested capital 3,257 3,281 3,326 3,386 Ratio,growth and per share analysis Year to 12/2018a 12/2019e 12/2020e 12/2021e Y-o-y%change Revenue-5.7 34.3 9.4 11.1 EBITDA-72.0 0.2 15.4 11.8 Operating profit-95.9 83.7 70.5 33.9 PBT-96.7 110.8 79.7 36.5 HSBC EPS-95.2 110.8 79.7 36.5 Ratios(%)Revenue/IC(x)0.9 1.3 1.4 1.5 ROIC 0.5 1.0 1.8 2.4 ROE 0.5 1.0 1.8 2.4 ROA 0.3 0.6 0.9 1.2 EBITDA margin 4.6 3.4 3.6 3.6 Operating profit margin 0.5 0.7 1.1 1.4 EBITDA/net interest(x)296.7 Net debt/equity-6.4-5.4-19.7-34.8 Net debt/EBITDA(x)-1.4-1.2-3.9-6.3 CF from operations/net debt Per share data(CNY)EPS Rep(diluted)0.02 0.04 0.07 0.10 HSBC EPS(diluted)0.02 0.04 0.07 0.10 DPS 1.10 0.01 0.02 0.03 Book value 3.95 3.99 4.04 4.12 Valuation data Year to 12/2018a 12/2019e 12/2020e 12/2021e EV/sales 1.8 1.4 1.1 0.9 EV/EBITDA 40.1 40.2 32.0 25.8 EV/IC 1.7 1.7 1.6 1.4 PE*386.3 183.2 102.0 74.7 PB 1.9 1.9 1.9 1.8 Dividend yield(%)14.6 0.1 0.2 0.3*Based on HSBC EPS(diluted)Issuer information Share price(CNY)7.53 Free float 46%Target price(CNY)6.20 Sector Machinery Reuters(Equity)002367.SZ Country China Bloomberg(Equity)002367 CH Analyst Helen Fang Market cap(USDm)853 Contact+852 2996 6942 ESG metrics Environmental Indicators 12/2018a Governance Indicators 12/2018a GHG Intensity(kg/USD)na No.of board members 7 Energy Intensity(kWh/USD)na Average board experience(years)na CO2 reduction policy No Female board members(%)na Social Indicators 12/2018a Board members Independence(%)33 Employee costs as%of sales na Employee turnover(%)na Diversity policy No Source:Company data,HSBC Price relative Source:HSBC Note:Priced at close of 13 Aug 2019 2.704.706.708.7010.7012.7014.702.704.706.708.7010.7012.7014.70201720182019Canny Elevator CompanyRel to CSI 300 IndexFinancials&valuation:Canny Elevator Company Reduce 5 Equities Machinery 15 August 2019 Financial statements Year to 12/2017a 12/2018e 12/2019e 12/2020e Profit&loss summary(CNYm)Revenue 4,777 5,861 9,603 11,990 EBITDA 1,284 1,393 2,296 2,802 Depreciation&amortisation-106-112-124-333 Operating profit/EBIT 1,178 1,281 2,173 2,468 Net interest 26 21 26 14 PBT 1,196 1,300 2,193 2,490 HSBC PBT 1,196 1,300 2,193 2,490 Taxation-111-104-175-199 Net profit 1,054 1,162 1,959 2,224 HSBC net profit 1,054 1,162 1,959 2,224 Cash flow summary(CNYm)Cash flow from operations 492 1,235 1,658 3,167 Capex-167-205-336-360 Cash flow from investment-370-205-1,605-360 Dividends-486-536-904-1,027 Change in net debt-622-529 795-1,781 FCF equity 332 1,030 1,321 2,807 Balance sheet summary(CNYm)Intangible fixed assets 611 574 541 511 Tangible fixed assets 965 1,038 3,714 3,712 Current assets 7,073 8,243 10,444 13,887 Cash&others 2,411 2,732 1,937 3,718 Total assets 9,047 10,253 15,096 18,508 Operating liabilities 2,944 3,663 6,118 8,266 Gross debt 208 0 0 0 Net debt-2,203-2,732-1,937-3,718 Shareholders funds 5,426 6,087 8,417 9,614 Invested capital 3,294 3,460 6,643 6,127 Ratio,growth and per share analysis Year to 12/2017a 12/2018e 12/2019e 12/2020e Y-o-y%change Revenue 30.5 22.7 63.8 24.9 EBITDA 39.0 8.5 64.8 22.0 Operating profit 41.6 8.7 69.5 13.6 PBT 14.6 8.7 68.6 13.5 HSBC EPS 10.2 7.5 63.1 13.5 Ratios(%)Revenue/IC(x)1.5 1.7 1.9 1.9 ROIC 33.5 35.9 40.2 36.0 ROE 19.4 19.1 23.3 23.1 ROA 12.5 12.2 15.7 13.6 EBITDA margin 26.9 23.8 23.9 23.4 Operating profit margin 24.7 21.9 22.6 20.6 EBITDA/net interest(x)Net debt/equity-38.5-42.6-22.0-36.9 Net debt/EBITDA(x)-1.7-2.0-0.8-1.3 CF from operations/net debt Per share data(CNY)EPS Rep(diluted)0.65 0.70 1.14 1.29 HSBC EPS(diluted)0.65 0.70 1.14 1.29 DPS 0.30 0.32 0.53 0.60 Book value 3.35 3.66 4.90 5.59 Valuation data Year to 12/2017a 12/2018e 12/2019e 12/2020e EV/sales 7.3 5.9 3.7 2.8 EV/EBITDA 27.2 24.7 15.4 12.0 EV/IC 10.6 10.0 5.3 5.5 PE*34.5 32.1 19.7 17.3 PB 6.7 6.1 4.6 4.0 FCF yield(%)0.9 2.8 3.5 7.5 Dividend yield(%)1.3 1.4 2.3 2.7*Based on HSBC EPS(diluted)ESG metrics Environmental Indicators 12/2018a Governance Indicators 12/2018a GHG emission intensity*NA No.of board members 9 Energy intensity*NA Average board tenure(years)NA CO2 reduction policy No Female board members(%)11.1 Social Indicators 12/2018a Board members independence(%)33.3 Employee costs as%of revenues NA Employee turnover(%)NA Diversity policy No Source:Company data,HSBC*GHG intensity and energy intensity are measured in kg and kWh respectively against revenue in USD 000s Issuer information Share price(CNY)22.