In recent years, the elevator industry is in a period of rapid growth. The sales volume of elevators in China increased from 168,000 units in 2006 to 760,000 units in 2015, with a compound annual growth rate of 19.5%. As diversified demands such as urbanization, affordable housing and renovation offset the negative impact of short-term decline in real estate investment on elevator demand, the elevator industry can maintain a good growth momentum even when the real estate demand and investment slump.

China's elevators are still dominated by foreign brands, but the competitiveness of local national brands is constantly improving, with the current market share reaching 46%. In the future, the market share is expected to continue to expand with the support of this policy and the advantage of cost performance.

Elevator sector investment value highlights

Elevator enterprises benefit from the urbanization process, and their operation status and industry fundamentals have maintained rapid and stable development. Compared with 5 representative listed companies and specialized equipment industry, elevator enterprises have the following advantages:

1) Good profitability: The combined net interest rate of the 5 listed companies in the elevator sector is 13.65%, which is better than the average of special-purpose equipment industry of 0.49%; Roe was 16.47%, which was also far better than the average of special-purpose equipment industry of -0.41%.

2) Abundant cash flow: The comprehensive value of "net operating cash flow/operating income" in the elevator sector is 10.07%, far higher than the average 2.83% in the machinery industry; The balance of cash and cash equivalents of the 5 listed companies at the end of the period is 9.422 billion yuan.

3) Valuation advantage: By the end of 2016, the dynamic p/E ratio of the elevator sector was basically around 20 times, far lower than the average level of the machinery industry.

Inventory and incremental to ensure high growth in the industry

In recent two years, due to the slowdown of macroeconomic growth and real estate regulation policies, elevator sales declined slightly. However, we believe that the performance of the elevator industry will maintain a steady growth, mainly because :1) The ownership of the elevator industry is far from saturated, and there will be a stable demand for new elevators in the future; 2) The proportion of elevators keeps increasing; 3) Gradually release the demand for the renovation of old elevators and the installation of elevators in old buildings; 4) The elevator installation and maintenance business develops rapidly and becomes the "new Blue sea"; 5) The state increases investment in infrastructure construction, and infrastructure construction drives demand; 6) One Belt And One Road brings broad opportunities in overseas markets.

Investment Suggestions Listed companies in the elevator industry have prominent fundamental advantages. In the current environment of low risk appetite in the market, the investment value of the elevator sector has gradually become prominent. The industry has a number of growth points, stock and increment in advance, the future development momentum is strong.