NWM(603700) 甬兴证券·2024-09-16 01:30Investment Rating - The report initiates coverage on Ningbo Water Meter (Group) Co Ltd with a "Buy" rating, citing its leading position in the water meter industry and growth potential in smart water services [2] Core Views - The company is a leading water meter manufacturer with over 60 years of experience, offering a wide range of products including mechanical and smart water meters, serving over 2,300 domestic water companies and exporting to 80+ countries [1] - Despite macroeconomic challenges, the company's revenue and net profit growth rebounded in 2023, driven by market recovery [1] - The domestic water meter market is expected to reach 238 million units and 25.4 billion yuan in sales by 2027, with smart water meters becoming a key growth driver [1] - The company is actively developing smart water services as its second growth curve, leveraging its deep industry expertise and technological capabilities [1] Financial Analysis - Revenue and net profit growth slowed after 2019 due to macroeconomic factors but showed signs of recovery in 2023 [1] - Smart water meters accounted for 60% of revenue in 2023, with higher gross margins than mechanical meters, though margins have been under pressure due to competition [37] - The company's gross and net profit margins stabilized in 2023 after a period of decline [39] - Accounts receivable days increased due to the rise in smart meter sales and macroeconomic impacts, but the company has implemented stricter controls to manage this [41] Industry Overview - The domestic water meter market is projected to grow steadily, with demand reaching 238 million units by 2027 [43] - Traditional mechanical water meters are being replaced by smart water meters, driven by advancements in wireless communication and ultrasonic technologies [44][50] - Smart water meter penetration in China increased from 23% in 2017 to 40% in 2021, with further growth expected as urbanization and smart city initiatives accelerate [53] - The global smart water services market is forecasted to reach $26 billion by 2027, with China's market also expanding rapidly [64][66] Key Highlights - The company is a leader in the water meter industry, with a strong R&D focus and participation in drafting industry standards [15] - It has a well-established sales network, serving over 2,300 domestic water companies and exporting to 80+ countries [60] - The company is leveraging its expertise to develop smart water services, including DMA metering, pipeline monitoring, and non-excavation repair solutions [63] - Despite macroeconomic headwinds, the water meter industry is expected to benefit from government policies and infrastructure investments [17][71] Profit Forecast and Valuation - Revenue is expected to grow to 1.85 billion yuan in 2024, 2.13 billion yuan in 2025, and 2.45 billion yuan in 2026, with net profit reaching 133 million yuan, 142 million yuan, and 159 million yuan, respectively [93] - The company's PE ratio is 14x for 2024 and 13x for 2025, higher than the industry average, reflecting its leading position and growth potential in smart water services [93]