JSSMDL(603530) 中邮证券·2024-09-27 08:07Investment Rating - The report assigns an "Accumulate" rating for the company, marking its first coverage [2]. Core Insights - The company, Shima Power, is a leading global player in composite insulators and a domestic leader in rubber sealing components for power equipment. It has benefited from the increasing investment in global power grids and the trend towards market segmentation in power equipment [3][4]. - The global investment in power grids is expected to reach $400 billion in 2024, with a projected annual growth rate of 12% for renewable energy and 11% for grid investments, driven by the COP28 goals [3][4]. - The company has a strong historical performance, with a CAGR of 13.4% in revenue and 16.8% in net profit from 2014 to 2023. The first half of 2024 showed significant growth, with revenue and net profit increasing by 32.7% and 177.5% year-on-year, respectively [21][25]. Summary by Sections Company Overview - Shima Power was founded in 1996, initially focusing on rubber sealing components for power equipment, and later expanded into the insulator sector in 1999. The company has received multiple national awards for technological advancements [3][13]. Market Trends - The report highlights that the power grid investment is crucial for energy transition, with a significant backlog of renewable energy projects awaiting grid connection. The global power grid investment is projected to increase significantly, indicating a robust market environment for the company [2][33]. Financial Projections - Revenue forecasts for 2024-2026 are estimated at 1.31 billion, 1.80 billion, and 2.53 billion yuan, respectively, with net profits projected at 300 million, 410 million, and 560 million yuan. The company is expected to achieve a CAGR of 37.1% in net profit over these years [4][6]. Competitive Advantages - The company’s composite insulator products have demonstrated superior economic benefits over traditional solutions, with a warranty period of 30 years. The company supplies 90% of the composite insulators for substations in Europe and North America, enhancing its competitive edge [3][4]. Operational Efficiency - The company has improved its operational efficiency, with a reduction in operating costs and an increase in gross and net profit margins. The gross margin for the first half of 2024 was reported at 47.3%, reflecting a significant year-on-year increase [25][29]. Research and Development - Continuous investment in R&D is emphasized, with a CAGR of 16.2% in R&D expenses from 2014 to 2023. The company maintains a stable R&D team, which is crucial for sustaining its technological advantages [30][32].