New Territories Pump Industry: Agricultural Pump Faucet Will Benefit from Industry Growth

With the spread of the drought, the New Zealand Pump Industry (002532.SZ), a leading agricultural pump company, received widespread market attention.

Since May, the company's share price has been active, but a large degree of correction has occurred on May 27th. The daily report closed at 18 yuan, a decrease of 8.54%, and the exchange rate was 7.92%.

"This year's drought situation is relatively serious and highlights the shortcomings of grassroots water conservancy construction in the middle and lower reaches of the Yangtze River. After the end of the drought, water conservancy projects may occur. Although the current earnings of pumps and irrigation companies are low, they include the New Territories pump in the long run. The Water Pump revenue space in the industry is still considerable,” said Song Jiening, a researcher with China Forestry Investment Counselor, who told the reporter of the “Financial Business” of the First Financial Daily.

It is understood that the New Territories pump industry is the leader in the domestic agricultural pump industry. From 2007 to 2009, the sales of agricultural water pumps has always been the first in the country. The company's main products are agricultural water pumps. The products are widely used in agricultural irrigation, water withdrawal and transportation for township residents and other fields.

From the perspective of the company's main business, agricultural water pumps are the company's main products, with its sales revenue accounting for more than 80%, and air compressors accounting for about 10% of the company's sales revenue. The main products of agricultural pumps are small submersible pumps, sewage and sewage instead of hydropower pumps, well-used clean water pumps, self-priming pumps, vortex pumps, and accessories and other products account for less than 5%.

In the first quarter of 2011, the drought in northern China was severe and the demand for water pumps increased significantly. In the first quarter, the company realized operating income of 140 million yuan, an increase of 40.54%, net profit of 10.18 million yuan, an increase of 18.51%, basic earnings per share of 0.13 yuan.

However, due to the increase in the price of silicon steel and other raw materials, the company's gross profit margin fell 2.84 percentage points year-on-year to 19.98%, a decline of 1.61 percentage points from the previous quarter. The cost rate during this period was 11.35%, a decrease of 1.88 percentage points from the same period last year. The decrease in the rate of expenses during the period was mainly due to the decrease in short-term borrowings and the decrease in interest expenses on borrowings and the increase in bank deposit interest charges by 189.07% year-on-year.

Xu Minle, an analyst at Bank of China International, believes that this year's Central Document No. 1 document's attention to water conservancy and the country's nearly 20% annual increase in agricultural financial investment will promote the rapid development of agricultural machinery. The company as a leading domestic agricultural pump industry will benefit from the rapid growth of the industry. .

“Survey understands that the company's pumps are for end-users and have certain consumption attributes. The company believes that the national water conservancy investment focuses on the construction of reservoirs and hydropower stations, as well as the upgrading and transformation of pumping stations. The main use of large pumps is that the company’s benefits will be indirect. He said.

According to public information, the company's fundraising project “annual production of 1 million agricultural water pump construction projects” will be completed and put into operation in 2011, and will reach production in 2012. It is expected that the project will increase annual sales income by 280 million yuan, and increase annual gross profit by 40 million yuan. In addition, the company's non-raised investment projects, "an annual increase of 150,000 sets of smart sliding air compressor technology transformation project," "Jiangxi New Territories project" and "Jiangsu New Territories project" are stepping up construction.

In addition, the increase in the concentration of the agricultural pump industry is also considered to be beneficial to the development of leading enterprises. It is understood that the production of agricultural water pumps in China is relatively concentrated in several provinces such as Zhejiang, but there are a large number of manufacturers in the industry. According to the statistics of the Agricultural Machinery Association, in 2008, there were about 3,000 agricultural pump manufacturers in China and less than 30 enterprises with a scale of more than 100 million yuan. The vast majority of companies are small in size, with annual production values ​​ranging from a few million to tens of millions of dollars.

Analysts believe that the current agricultural water pump industry is still relatively fragmented, but the development of a centralized economy is now emerging. The company has a natural geographical advantage in the process of future industry consolidation. At present, the company’s leading position in the industry’s market share also enables it to obtain considerable profits in the industry consolidation process.

Tianxiang Investment expects that the company's earnings per share for 2011 to 2013 will be 0.92 yuan, 1.25 yuan, and 1.49 yuan respectively, and the corresponding dynamic price-to-earnings ratios will be 43 times, 32 times, and 27 times, respectively, and the company will maintain its investment rating of "overweight". .

According to recent data, there are 11 agencies that have made predictions for the performance of the New Zealand Pump Industry in 2011. The average forecast net profit is 79 million yuan, an increase of 34.28% over the previous year.