WEFLO(SZ:002871) CMS·2025-09-23 14:50Investment Rating - The report initiates coverage with a "Strong Buy" investment rating for the company [1][9]. Core Insights - The company specializes in the export of civil valves and has established a global presence, benefiting from the expansion of global AIDC capital expenditures and the increasing penetration of liquid cooling systems [1][9]. - The company has shown steady revenue growth, with a projected revenue increase from 5.78 billion yuan in 2024 to 11.75 billion yuan by 2027, reflecting a compound annual growth rate (CAGR) of 31% [8][9]. - The company has a clear and stable shareholding structure, with the main shareholder holding 55.83% of the shares, ensuring consistent strategic decision-making [32][37]. Company Overview - The company has over 30 years of experience in the civil valve industry, focusing on fire valves, water valves, and natural gas valves, with a complete SKU range [6][13]. - The company has obtained certifications from multiple countries, exporting to over 70 countries and regions, and is the sole supplier of fire valves for Saudi Aramco in Asia [6][13]. - The company’s revenue from exports is expected to account for approximately 76% in 2024 [6]. Financial Performance - From 2020 to 2024, the company's revenue grew from 345 million yuan to 578 million yuan, with a CAGR of 14%, while net profit increased from 58 million yuan to 131 million yuan, with a CAGR of 22.6% [6][8]. - The company's gross margin improved from 34.53% to 40.34% and net margin from 16.82% to 22.65% during the same period, indicating enhanced profitability [6][30]. Market Characteristics - The global valve market was approximately 73 billion USD in 2021 and is projected to reach 90.5 billion USD by 2026, driven by increasing demand in healthcare, pharmaceuticals, and smart city developments [6][45]. - The valve market is characterized by a fragmented competitive landscape, with major players concentrated in the US, Japan, and Germany, while domestic companies often focus on niche segments [39][51]. Data Center Demand - The increasing penetration of liquid cooling systems in data centers is expected to drive significant growth in valve demand, as these systems require precise flow and temperature control [6][9]. - The complexity of liquid cooling systems is leading to a higher demand for high-precision control valves, which will increase the overall value of valve applications in this sector [6][9]. Competitive Landscape - The valve manufacturing industry is dominated by established players in the US, Japan, and Germany, while the domestic market remains fragmented with many small-scale companies [51][57]. - The company is positioned to capture market share due to its competitive pricing and shorter delivery times compared to foreign brands, alongside its extensive project experience in overseas markets [9][51].