ZK International Group Co., Ltd. (Nasdaq: ZKIN) is a China-based manufacturer of stainless steel pipe for water and gas that has becoming one of the key suppliers in China and while that may not seem as appealing to investors as biotech or gold, you can’t overlook growth and earnings that match those sectors’ performance. ZKIN has the fundamentals to growth.
Ok, you ask.. why is ZKIN a play? Two words; Growth and Revenue. ZK International Group Co., Ltd. reported $36.8 million in revenue in 2016 on head-turning net income of $5.3 million. Those results were generated mostly from China’s booming urban growth in a market where most of the water pipe is plastic, which also raises health concerns along with the corrosive copper pipes.
Currently, stainless steel only makes up about 3% of water pipeline in China, reflecting a high growth rate potential for ZKIN. That equates to $32 billion in water pipeline in residential housing nationwide in 2013, with stainless steel showing a 25% annualized growth rate. By 2016 the water pipeline market in China topped $58 billion.
So where do those figures come from? Only 3% of the 1.4 Billion Chinese citizens have access to drinking water in their homes. China accounts for ~20% of the world’s population, yet has access to only 7% of the world’s renewable
Add that to China’s booming urbanization and you can see why ZKIN has good potential for growth.
But water isn’t China’s only problem within urban markets; natural gas pipeline usage grew 200% in five years from 2010 through 2015 and now stands at 600,000 km. That’s more-than a 19% annual growth rate with gas consumption rising at a 17% annual rate. China’s gas pipeline market reached $2 billion in 2016.
See what we mean by Appealing Fundamentals of potential growth and revenue?
The combined water and gas pipeline market in China grew to $60 billion by the end of 2016 with ZKIN barely taking a 1% market share. Hardly an industry leader, right? Wrong!! ZK International Group Co., Ltd. (Nasdaq: ZKIN) holds 28 patents with awards for its innovative pipe couplings in stainless steel. That gives ZK International Group Co., Ltd. (Nasdaq: ZKIN) a competitive edge that should reflect in capturing higher market share over time. The Company has also become an approved “qualified supplier” to six of China’s water and gas transmission companies with more resources expected to add to ZK International Group Co., Ltd. next year.
ZKIN is well-positioned for increased growth as it continues to deploy pipe and fitting systems in China’s construction boom. Their project teams work closely with urban planners and real estate developers designing and implementing sophisticated pipe and fitting solutions as well as providing engineering expertise. As more developers better understand the use of stainless steel in their projects, ZKIN will continue to have a growing opportunity.
ZK International Group Co., Ltd. (Nasdaq: ZKIN) helps bring communities reliable and durable gas and water transmission systems.
There are major players in infrastructure that are heavily involved in the industry. Although for our criteria they are too big and mature to make an investment for a nice gain, it is good to know a bit about the bigger players in this market.
Major market leaders include:
• Vulcan Materials Company (NYSE:VMC)
• Caterpillar Inc. (NYSE:CAT)
• The Home Depot, Inc. (NYSE:HD)
Please take some time to research some of the recent headlines from the major market companies about their activities in this growing sector.
Vulcan Materials Company (NYSE:VMC) produces and sells construction aggregates, asphalt mix, and ready-mixed concrete primarily in the United States. It operates through four segments: Aggregates, Asphalt Mix, Concrete, and Calcium. The Aggregates segment offers crushed stone, sand and gravel, sand, and other aggregates, as well as related products and services. This segments aggregates are used in publicly funded construction, such as highways, airports, and government buildings; and sold to federal, state, county, or municipal governments/agencies. The Asphalt Mix segment offers asphalt mix in Arizona, California, New Mexico, and Texas. The Concrete segment provides ready-mixed concrete in Arizona, Georgia, Maryland, New Mexico, Texas, Virginia, Washington D.C., and the Bahamas. The Calcium segment mines, produces, and sells calcium products for the animal feed, plastics, and water treatment industries. The company was formerly known as Virginia Holdco, Inc. Vulcan Materials Company was founded in 1909 and is headquartered in Birmingham, Alabama.
Caterpillar Inc. (NYSE:CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives for heavy and general construction, rental, quarry, aggregate, mining, waste, material handling, oil and gas, power generation, marine, rail, and industrial markets. Its Construction Industries segment offers backhoe, compact, track-type, small and medium wheel, knuckleboom, and skid steer loaders; small and medium track-type, and site prep tractors; mini, wheel, forestry, small, medium, and large track excavators; and motorgraders, pipelayers, telehandlers, cold planers, asphalt pavers, compactors, road reclaimers, and wheel and track skidders and feller bunchers. The companys Resource Industries segment provides electric rope and hydraulic shovel, landfill and soil compactor, dragline, large wheel loader, machinery component, track and rotary drill, electronics and control system, work tool, hard rock vehicle and continuous mining system, scoop and hauler, wheel tractor scraper, large track-type tractor, and wheel dozer products; longwall, highwall, and continuous miners; and mining, off-highway, and articulated trucks. Its Energy & Transportation segment offers reciprocating engine powered generator set and engine, integrated system, turbine, centrifugal gas compressor, diesel-electric locomotive and component, and other rail-related products and services.
The Home Depot, Inc. (NYSE:HD) operates as a home improvement retailer. It operates The Home Depot stores that sell various building materials, home improvement products, and lawn and garden products, as well as provide installation, home maintenance, and professional service programs to do-it-yourself, do-it-for-me (DIFM), and professional customers. The company offers installation programs that include flooring, cabinets, countertops, water heaters, and sheds; and professional installation in various categories sold through its in-home sales programs, such as roofing, siding, windows, cabinet refacing, furnaces, and central air systems, as well as acts as a contractor to provide installation services to its DIFM customers through third-party installers. It primarily serves home owners; and professional renovators/remodelers, general contractors, handymen, property managers, building service contractors, and specialty tradesmen, such as installers. The company also sells its products through online. It operates through approximately 2,278 stores, including 1,977 in the United States, including the Commonwealth of Puerto Rico, and the territories of the U.S. Virgin Islands and Guam; 182 in Canada; and 119 in Mexico. The Home Depot, Inc. was founded in 1978 and is based in Atlanta, Georgia.
A High Growth Industry In Developing Countries
According to China Statistics, national residential real estate investment in 2013 was $943.2B and 2.5% or $32B of the investment was for water supply pipeline. This market is increasing 25% annually supported by a growing construction market. In addition, gas consumption in China is growing at 17% annually driven by the growth of urbanization. From 2010 to 2015, urban gas pipeline length increased from 250,000 to 600,000 km at an annual growth rate of 19.14%.
ZK International Group Ltd. (Nasdaq: ZKIN) is as appealing as those GIANTS we’ve covered in the past and we think our readers will agree! Look for ZKIN on the NASDAQ.
Keep Your Eye on ZKIN and Watch For New Developments