CIMC Safeway Technologies is a global leader in tank container manufacturing, with industry-leading production, technology, and supply chain capabilities. With the development of the chemical logistics industry, the demand for tank containers continues to rise. The Company has expanded its production capacity, developed intelligent technologies, and established a presence in the after-market services. Additionally, it has ventured into the manufacturing of medical equipment and precision metal processing businesses, which will likely consolidate its dominant position in the industry and contribute to its incremental growth. We estimate the Company’s 2023E-25E ANP at Rmb590mn/710mn/957mn, corresponding to EPS of Rmb0.98/1.18/1.59, with the stock currently trading at 20x/17x/12x 2023E/24E/25E PE. Taking into account both PE and PEG valuation methods, we assign 25x 2023E PE to derive a target price of Rmb25, and initiate coverage with a “BUY” rating.

A leading enterprise in the global field of tank container manufacturing. CIMC Safeway Technologies has been deeply involved in tank container manufacturing sector for many years, as a global chemical logistics equipment manufacturer and a full-lifecycle service provider that integrates the design, research and development (R&D), manufacturing, and sales of tank containers. The Company specializes in providing secure, cost-effective, and environmentally friendly solutions for storing and transporting various categories of chemical liquids, liquefied gases, and powdered commodities. In addition to manufacturing, the Company offers post-market services such as maintenance, cleaning, refurbishment, and modification for tank containers. Leveraging internet of things (IoT) technology, it also provides customized information services for tank containers. With robust manufacturing capabilities and a comprehensive quality control system, the Company has expanded its manufacturing capabilities to include medical equipment components widely used in the field of magnetic resonance imaging devices. In 2022, CIMC Safeway Technologies achieved revenue of Rmb5,539mn and attributable net profit of Rmb708mn, with a 9.43% and 23.27% CAGR from 2019 to 2022 were, respectively.

Distinct leadership effects, stable industry landscape and prosperity uptrend in tank container manufacturing driven by the global chemical trade growth.

The ongoing expansion of the global chemical trade continues to fuel the sustained growth of the chemical logistics industry. Among chemical logistics equipment, tank containers stand out for their notable advantages in universality, safety, and environmental friendliness. With the further development of global chemical trade, we foresee an additional surge in the demand for tank containers. Simultaneously, taking into account the substantial market investment in tank containers during the period of unavoidable factors from 2019 to 2022, we expect a slowdown in the short- term growth rate of newly added tank containers. We project that by 2025, the global market for tank container manufacturing will reach Rmb10.2bn, with a　　8.28% CAGR from 2020 to 2025. The industry has undergone years of development, resulting in a highly concentrated industry structure. Tank containers present high entry barriers in areas such as R&D, manufacturing, after-sales service and customer channels and the industry leaders boast clear first-mover advantages. Therefore, we anticipate that the future landscape of the tank container manufacturing industry will remain stable, with leading companies maintaining or expanding their competitive advantage and market share.

Tank container manufacturing competitiveness enhanced by intelligentization transformation and capacity expansion enhance. According to ITCO data, the Company's global market share exceeded 50% from 2020 to 2022, establishing its leader position in the tank container manufacturing industry with a substantial volume advantage. As of the end of 2022, the Company holds 273 granted patents, supported by a team of 373 technical personnel, ensuring a solid foundation for continuous innovation. Its client base includes major global container leasing companies and operators, fostering strong collaborations and maintaining a high-quality customer structure. On the raw material front, the Company's supplier structure and composition have remained stable over the long term, mitigating risks associated with raw material supply. Additionally, as per the Company's prospectus, the capacity of its tank container business is likely to expand with the completion of new projects. Post-market services for tank containers are set to achieve further efficiency, automation, and intelligence. Simultaneously, leveraging its existing manufacturing technology advantages, it is poised to increase capacity in high-end medical equipment, develop new high-end medical devices, and advance precision manufacturing technology in non- ferrous metals, creating new opportunities for growth.

Potential risks:

Disappointing construction progress of invested projects; international trade frictions; significant fluctuations in raw material prices; exchange rate changes; concentration of major raw material suppliers and risks of overseas procurement; gross profit margin (GPM) downturn.

Investment strategy:

CIMC Safeway Technologies is a leading global player in the manufacturing of tank containers, possessing industry-leading production, technology, and supply chain capabilities. Alongside the development of chemical logistics, the demand for tank containers continues to escalate. The Company has expanded its own production capacity, advanced intelligent technology, established a footprint in after-market services, and diversified into the manufacturing of medical equipment and precision metal processing. The industry's advantageous position is likely to be strengthened, and performance is projected to further improve. We anticipate the Company's 2023E/24E/25EANP to be Rmb590mn/710mn/957mn, corresponding to EPS forecasts of Rmb0.98/1.18/1.59 on 20x/17x/12x 2023E/24E/25E PE at the current price. Considering both PE and PEG valuation methods, factoring in the industry's average valuation and the relatively low historical valuation in the tank container industry, we assign 25x 2023E PE to derive a target price of Rmb25, initiate coverage with a "BUY" rating.