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Canny Elevator:Robust new elevator/escalator sales growth;demand for repair/maintenance ramping up

发布时间:2016-10-26    研究机构:瑞银证券

Property market recovery to drive ramp-up of new elevator/escalator marketThe property market has recovered noticeably YTD: Jan-Sep new-start GFA rose 26.9%YoY, much faster than at end-2015 (-14.0%). Contracted sales GFA rose 6.8% YoY.

The UBS property and macro teams have raised their forecasts for 2016 contractedsales and new-start GFA growth to 12.6%/6-8% (from 9.1%/5.0%). According to theNational Bureau of Statistics, a total of 390k units (+7.4% YoY) of elevators/escalatorswere produced in China in Jan-Aug 2016. We believe the recovery of the propertymarket will drive the new elevator and escalator market to ramp up and estimate newelevator and escalator output will reach 750k in 2016, up 11% YoY.

GPM likely to expand further with rising OEM repair/maintenance demandThe Beijing Municipal Quality Supervision Bureau (QSB)'s elevator safety assessment inSeptember found that there are >15k elevators in Beijing with potential safety risks,58% of which are residential elevators. The bureau plans to carry out special elevatorrepair work. The Shenyang Municipal QSB said 38% of the complaints it received inH116 involved elevators. The government and residents are paying more attention toelevator quality/safety, but there is still potential safety risk from third-partyrepair/maintenance, so we think more residential elevators will shift to OEMrepair/maintenance. Canny is developing a cloud-based smart elevator service platformusing IoT technology, and we expect IoT applications to further expand its OEM repair/maintenance business. In H116, installation, repair & maintenance gross margin rose3ppt to 25%. We expect increasing revenue to further expand gross margin.

Expanded presence in robotics sector, but limited near-term growthCanny acquired a stake in Canbot in 2014 to enter the service robots area. Under thevaluation adjustment mechanism agreement, Canbot pledged 2016 net profit of atleast Rmb30m; however, it reported a net loss of Rmb7.75m in H116, opening up awide gap with the full-year target. In addition, Canny, via its wholly-owned subsidiaryCanny Robotics Industry Investment, invested Rmb3m in Ruibukang in June 2016 toenter rehabilitation/exoskeletal robots. As the market for these products is stillmonopolised by European/American producers and the company only has a 5% stake,we see limited near-term earnings growth from the robotics sector.

Valuation: Maintain Rmb18.00 PT, Buy ratingOur DCF-based PT of Rmb18.00 assumes 8.4% WACC and implies 20x 2017E PE. Wehave a Buy rating based on Canny's robust growth.

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