Xianheng International(SH:605056) EBSCN·2024-06-10 05:01Investment Rating - The report initiates coverage with a "Buy" rating for the company [2][67]. Core Viewpoints - The company is positioned in the power grid industry with a rich product line and a nationwide service network. It is expected to expand into four major sectors, including oil and petrochemicals, under the trend of centralized and transparent procurement by state-owned enterprises, leading to continuous revenue growth. The understanding of new application scenarios is expected to improve, which will enhance the gross margin as the proportion of self-produced products and services increases. The forecasted net profit for the years 2024-2026 is 234 million, 295 million, and 377 million yuan, corresponding to PE ratios of 21, 17, and 13 times [1][67]. Summary by Relevant Sections Company Research - The company is a leading national MRO centralized supplier, primarily serving the power grid sector. It provides over 1 million SKUs across 12 major categories of tools and instruments. In 2023, the revenue from the power grid sector accounted for 60.3% of total revenue, ranking tenth in the number of bids won in the State Grid's material category [64][67]. Market Overview - The MRO market in China is projected to grow significantly, with the industry size reaching approximately 3 trillion yuan in 2022. The demand for MRO procurement typically accounts for 4%-7% of industrial enterprises' output value. The trend towards centralized and e-commerce procurement is becoming increasingly prominent, with online MRO procurement platforms experiencing substantial growth [5][67]. Financial Performance - The company is expected to see revenue growth rates of 13%, 12%, and 11% in the power sector for 2024-2026. The gross margin is anticipated to stabilize at 34.7% during the same period, despite previous pressures from standardized bidding projects [8][67]. Strategic Expansion - The company has initiated a "4+1" strategic plan to expand into new sectors such as oil and petrochemicals, nuclear industry, transportation, and government emergency services. The potential for growth in these new markets is significant, with only about 10 out of 97 state-owned enterprises currently being targeted [76][67]. Competitive Advantage - The company benefits from a nationwide sales network and a strong service team of over 800 personnel, allowing it to meet the diverse and fragmented MRO needs of the power grid sector effectively. Its vertical business model enables higher gross margins compared to platform-type MRO enterprises [61][99].