SGC(SH:603269) Hua Yuan Zheng Quan·2024-04-25 10:00Investment Rating - The report assigns an "Accumulate" rating for the company, indicating a positive outlook for future performance [28]. Core Viewpoints - The company is recognized as a leading player in the cooling tower industry, with a wide economic moat and strong market position. It has established a robust relationship between technology, brand, scale, and cash flow, which enhances its competitive advantage [28][91]. - The traditional downstream sectors, including petrochemicals and power generation, are expected to maintain resilience, while the overseas market presents significant growth potential. The company has been proactive in expanding its international presence, particularly in Southeast Asia and the Middle East [28][72]. - The report highlights the imminent shift towards liquid cooling solutions, with the company positioned to benefit from this trend. The cooling tower is deemed essential in the liquid cooling process, and the company is well-equipped to capture market share in this segment [28][32]. - The company has entered the hydrogen equipment manufacturing sector through the acquisition of Suzhou Green Meng, which is expected to enhance its growth trajectory by leveraging synergies with its existing cooling tower business [28][19]. Summary by Sections 1. Domestic Cooling Tower Leader with Broad Moat - The company is a prominent player in the cooling tower industry, with a significant market share and a well-established reputation. It has built a wide economic moat through technological innovation and brand recognition [28][91]. - The company has a strong international presence, with nearly 50% of its revenue coming from overseas markets, particularly in Southeast Asia and the Middle East [28][72]. 2. Traditional Downstream Resilience and Overseas Market Growth - The company’s traditional downstream sectors are aligned with the previous industrial and energy revolutions, ensuring sustained demand. Key sectors include petrochemicals, power generation, and semiconductors [28][83]. - The company has been an early mover in global expansion, actively participating in the Belt and Road Initiative, which enhances its growth prospects in emerging markets [28][72]. 3. Liquid Cooling Penetration Point and Domestic Replacement Potential - The report emphasizes the growing importance of cooling towers in the liquid cooling segment, which is expected to see increased adoption due to rising computational demands [28][32]. - The company is positioned to lead the domestic replacement of cooling towers, benefiting from its established market presence and technological capabilities [28][32]. 4. Entry into Hydrogen Equipment Sector - The acquisition of Suzhou Green Meng allows the company to tap into the burgeoning hydrogen equipment market, which is projected to grow significantly as green hydrogen projects gain momentum [28][19]. - The overlap between the company’s cooling tower clients and hydrogen equipment customers presents a unique opportunity for cross-selling and enhanced growth [28][19]. 5. Profit Forecast and Valuation - The company is expected to achieve net profits of 81 million, 111 million, and 143 million CNY for the years 2023, 2024, and 2025, respectively, indicating a positive growth trajectory [28]. - The report suggests that the company is undervalued compared to its peers, with a projected PE ratio of 26X, 19X, and 15X for the next three years [28].