Citic Securities released a research report that PLC and DCS are an essential core link for China to continue to strengthen its position as a manufacturing power and achieve industrial autonomy and control. In the past three years, the power DCS market is expected to usher in rapid growth. Small PLC, dedicated alternative general trend continues; Optimistic about large and medium PLC products, customers of suppliers to achieve breakthroughs.

Citic Securities’ main views are as follows:

PLC+DCS: field level industrial control system, digital base for manufacturing industry.

In terms of development logic, the development of industrial control technology ADAPTS to the expansion of industrial scale and achieves the improvement of production efficiency, among which the PLC and DCS used in the field have a high technical threshold, industry barriers and investment value.

PLC is a high-reliability industrial computer, software and hardware integration products, the core performance indicators are computing, communication and storage capabilities. PLC performance, reliability is the threshold of competition, and ecology is the moat. PLC products need secondary development, development engineers will choose familiar development tools, and more tools and hardware binding to form an ecology. Siemens localization ecological cultivation to do better, in the domestic market share significantly ahead of the overseas share of similar Rockwell Automation.

DCS is a system-level program, the business model for consulting and implementation, a total of about 80% of the three downstream are process industries, the production environment is harsh, the reliability requirements are higher than PLC, according to the Ministry of Industry and Information Technology “control system” one-stop application plan declaration guide “, petroleum and petrochemical DCS average trouse-free time requirements of more than 22 years, so the industry entry barriers are extremely high. According to Rui Industry data, in terms of contracts, China’s DCS market CR5 rose from 59.9% in 2011 to 73.8% in 2022.

Industrial control market: the PLC+DCS space exceeds 25 billion yuan, and domestic substitution is the core logic.

PLC market space, according to Rui Industry data, in 2022, China’s PLC market space exceeds 16.9 billion yuan, and is expected to drive several times the scale of the actuator market.

PLC downstream applications, PLC small/medium and large accounted for about 50%, small PLC multi-service discrete manufacturing industry, sold to equipment manufacturers through dealers; Medium and large PLC both discrete and process service capabilities, direct or through the integrator service manufacturing enterprises. In the past five years, the PLC market space has grown rapidly, and the main driving factor is the capacity expansion of China’s advantageous industries such as batteries and photovoltaic.

PLC competition pattern, small PLC by binding China’s advantageous industries to expand production capacity, to replace overseas general products with special solutions, the localization rate increased from 6.6% in 2017 to 18.3% in 2022; The threshold of medium and large PLC is higher, the pattern is concentrated, CR6 exceeds 92% and all are overseas manufacturers.

DCS market space, according to Rui industrial data, in 2022, China’s DCS market space exceeds 8.6 billion yuan, which does not match China’s industrial status, and the future development space is larger.

DCS downstream applications, DCS downstream three industries, namely chemical, petrochemical, power accounted for nearly 80%, China’s power DCS market share is lower than overseas, there is room for improvement.

DCS competition pattern, DCS vertical industry barriers are stronger, industry pattern changes from the accumulation of similar cases, but domestic manufacturers through better services to achieve domestic substitution, localization rate has been close to 50%.

Looking to the future: DCS localization and periodic resonance, PLC is expected to usher in structural opportunities.

The downstream of small PLC is more dispersed, the short-term upstream CAPEX is still under pressure, and the demand growth of China’s advantageous industries such as wind power and photovoltaic is optimistic.

Medium and large PLC, large PLC accounts for a low proportion of production line cost, it is difficult to break through low-cost competition, domestic manufacturers are currently in the case accumulation stage, looking forward to have customer resources and high customer trust manufacturers after obtaining seed customers, to achieve a rapid increase in share.

Reviewing the history, DCS mostly resonates with the industry Beta, and is optimistic about the growth opportunities brought by the resonance of the three major factors of thermal power expansion, DCS replacement and energy autonomy and control; According to estimates, the incremental space brought by expansion is expected to reach 2.86 billion to 3.20 billion yuan, with a high certainty; The potential market space brought by the replacement of stock localization is expected to reach 15.9 billion yuan.

From the perspective of landing expectations, Shanghai Electric’s new orders for coal-fired power generation equipment accelerated significantly, with a year-on-year growth of 92% in the first half of 2023, and there is a certain certainty about the track.