SUPCON Technology (688777) 长江证券·2024-12-11 00:50Investment Rating - Maintain "Buy" rating for Zhongkong Technology (688777 SH) [4] Core Views - Zhongkong Technology is a leading provider of intelligent manufacturing solutions for the process industry in China The company has successfully transformed its business model twice demonstrating strong technical capabilities and strategic vision [2] - Despite cyclical factors affecting traditional businesses due to high market share new demand (equipment replacement) and new market expansion (overseas) provide strong growth momentum for the company [2] - The company is expected to achieve net profits of 1 21 1 44 and 1 78 billion yuan in 2024 2025 and 2026 respectively with corresponding P E ratios of 32 9x 27 6x and 22 3x [2] Historical Growth and Strategic Evolution - Zhongkong Technology initially focused on DCS (Distributed Control Systems) and later expanded to large-scale clients with the development of ECS-700 a next-generation product By 2011 the company achieved the top market share in China's DCS market [4] - The company transitioned from a single DCS supplier to a comprehensive automation product provider by extending its product line to include industrial software and instrumentation [4] - From 2016 onwards the company developed a comprehensive intelligent manufacturing solution and introduced a new business model "S2B+5S" leveraging its DCS expertise to expand across products industries and regions [4] - Between 2016 and 2023 the company achieved a compound annual growth rate (CAGR) of 29% in revenue and 55% in net profit [4] Growth Drivers - The company's growth is driven by continuous product iteration supported by strong R&D capabilities including a robust R&D team significant R&D investment and high-quality industry-academia collaboration [5] - Strategically the company has consistently expanded its product portfolio from small and medium DCS systems to four major control systems and from APC (Advanced Process Control) to 11 industrial software systems and over 200 industrial apps [5] Current Market Position and Future Outlook - In the short term cyclical factors are increasingly impacting traditional businesses due to high market share However new demand for equipment replacement and overseas market expansion provide growth opportunities [6] - The global DCS market is expected to grow from 19 9 billion USD in 2023 to 26 7 billion USD by 2028 with a CAGR of 6 1% The domestic market accounts for only 10% of the global market indicating significant overseas potential [6] - In the first half of 2024 the company's overseas revenue and orders reached 343 million yuan and 500 million yuan respectively representing year-on-year growth of 188% and 64% [6] - Long-term the company aims to transition from project-based to product and platform-based operations with its new AI strategy playing a key role in this transformation [6] Financial Projections - The company is expected to achieve net profits of 1 21 1 44 and 1 78 billion yuan in 2024 2025 and 2026 respectively with corresponding P E ratios of 32 9x 27 6x and 22 3x [7]