J.P. 摩根-全球电气设备行业-自动化产业：摩根大通系统集成商调查-2021.5.20-58正式版

GlobalEquityResearch

20May2021

AutomationIndustry

JPM/CSIASystemIntegratorSurvey:HappyDaysAreHereAgain

Notsurprisingafter1Qresults,ourlatestproprietarysystemintegratorsurveyreflectsanupbeatoutlook,supportingoptimismthatcapexisreturningwithstronggrowthin’21,aspermostindicatorsinatruncatedcycle.Thissurveypointedtoaninflectioninexpectationswithcommentaryatthehighestlevelthatwehaveinsurveyrecordsinmostinstances,furtherevidencethatthiscycleisdifferentfromthepast.Mostintegrators(90%)anticipateanincreaseindemandoverthenext12months,ameaningfulstepupfrompriorsurveysthatweredownbeatasCOVID-19wasstillhavinganimpact.Similarly,ordersareexpectedtorampupfurther,translatingtorevenuegrowth.Thisissupportedbypentupdemandfromunderinvestmentthroughthepandemicleadingtomorepositiveclientcapexforecastswith80%ofrespondentsanticipatingatleastsomegrowth.Thissaid,backlogcommentaryisonlysomewhatstrongerandvisibilityappearsslightlylowerthanthepositivesentiment.Comparedtotheprior‘14/’15cycle,wheredeclineswerenowherenearasonerousas‘08/’09,sentimentseemsstrongerwiththeforwardlookforrevenuemuchhigherthanwepreviouslysawandsomerespondentsevengoingasfarastosaythatCOVID-19hadnoimpactontheirbusiness.Clientcapexexpectationsarealsobetterthistimearound(up0-10%vs.0-5%declinesin‘15).Onendmarkets,positivecommentaryisstillskewedtowardshybridmarketslikeFood&Beverage,whichhasbeenconsistentforthepastthreeyears,andLifeSciencesisviewedpositivelyforthesecondsurveyinarow.Allin,thisreflectswhatweseeinthemacrodata,withafastin,fastoutdynamicinactivitydrivingamoreshallowdeclineincapexin'20,andanevenmoresignificantmovebackupin'21tobeyondtrendandbeyondpriorcyclepeaks,withsustainabilityofgrowththekeyquestiontobeansweredintheFallsurvey.Turningtosoftware,techadoptionappearstobeacceleratingbutisseeminglyshiftingtowardsITconsultantsversusautomationequipmentsuppliers.WecontinuetolikeOW-ratedSiemensversusUW-ratedROK,withSiemensbenefittingastructuraladvantagearounditssoftwarecentricportfolio,whileweremainOWonEMR(attractivevaluationforlatecycleportfolio).WealsoremainOWSchneiderElectric.

J.P.Morgan/CSIAautomationsurvey.Thisnotesummarizesourlatestproprietarysurveyofcontrolsystemintegrators,wherewereceived~200responses.Systemintegratorsarethird-partyfirmsfocusingondeliveringtechnicallyadvancedcapitalprojects,aproxyforupwardof70%ofsalesforautomationsuppliers.ResponsesareslantedtowardNorthAmerica,similartotheoverallSIindustry,butwithsomeglobalrepresentationaswell.WearepleasedtocontinueourpartnershipwithCSIA(ControlSystemIntegratorsAssociation),theleadingprofessionalassociationrepresentingtheindustry.

Surveyresultsshowinflectioninactivityin1Q,confirmingstronggrowthtrajectoryfromquarterlyresults.Responsesondemandshowabounceoffoflowsofthepandemicyear,asthetrendsareshowinganuptickintheorderactivityandrevenuegrowth.Theoverallpercentageofthosereportingorderstrengthversusweaknesswasmorefavorablevsourpriorsurvey(63%/15%strength/weaknessvs36%/42%prior),withexpectationfororderactivityoverthenext6monthshigherat~70%/6%(strength/weakness)vs~62%/13%%inourpriorsurvey.OnMarchtrendsspecifically,~51%notedstrongerdemand

ElectricalEquipment&Multi-Industry

C.StephenTusa,JrCFAAC

(1-212)622-6623stephen.tusa@BloombergJPMATUSA<GO>J.P.MorganSecuritiesLLC

PatrickM.Baumann,CFA

(1-212)622-0160

patrick.m.baumann@

J.P.MorganSecuritiesLLC

EuropeanCapitalGoodsAndreasWilliAC

(44-20)7134-4569andreas.p.willi@BloombergJPMAWILLI<GO>J.P.MorganSecuritiesplc

Seepage51foranalystcertificationandimportantdisclosures,includingnon-USanalystdisclosures.

J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.

C.StephenTusa,JrCFA

GlobalEquityResearch

(1-212)622-6623

20May2021

stephen.tusa@

thaninJan/Febvs~7%indicatingweaker(~15%/48%Apr’20),showingMarchisbetterseasonallyonrecovery.OnB2B,~42%are>1.0xand~15%are<1.0x,comparedtoourOct’20surveywhichshowed~26%>1.0xand~36%<1.0x.LookingatB2Bacrossendmarkets,Oil&GasandAutomotive&Tire,responsesareshowingpositivesignswith~18%seeingB2Bat>1xvs~8%priorinOil&Gas,~31%seeing>1.0xvs~14%priorinAuto&Tire,whilebook-to-billatFood&Bev~41%seeing>1.0xvs~30%inpriorsurvey.

Growthexpectationspositive.~89%ofrespondentsanticipategrowthindemandconditionsoverthenext12months,higherthan~67%inourpriorsurvey,with~44%expecting>10%growthvs~28%inthepriorsurvey.Keepinmind,asalways,responsesaretypicallybiasedonoptimisminforwardexpectations,andactualgrowthtendstofallbelowexpectationsaswe’veseeninpriorsurveys.Onbacklogvisibility,~36%saidtheywereatnormallevels(vs~31%inpriorsurvey)and~39%atstrongerthannormallevels(vs~22%inpriorsurvey),whichisbetterascomparedtopriorsurvey.Morenumberofrespondentswerepositiveonclientcapexexpectations,~80%expectittobeupin2021(vs~64%inpriorsurvey)with~50%seeing5%+growth(vs~39%inpriorsurvey)and~30%ofrespondentsseeing~0-5%(vs~25%inprior).ForROK,weassumeorganicgrowthof7.3%inFY21and6.2%growthinFY22.AtEMR,wemodelFY21organicsalesup5.4%(up1%forAutomation),followedby5.9%inFY22(8%inAutomation).AtSiemensDIwelookfor8.2%/5.7%likeforlikegrowthin2021E/2022Eaftera6.3%declinein2020.AtSchneiderIndustryAutomation,wemodel10.8%/6.1%likeforlikegrowthfor2021E/2022Efollowinga5.3%declinein2020.AtABB,welookforRobotics

DiscreteAutomationtogrow7%/8%in2021E/2022Eincomparabletermsaftera13%declinein2020whilewelookforrevenuestoincrease3.5%/3.2%in2021E/2022EincomparabletermsforProcessAutomationsegmentaftera7%declinein2020.

Positiveendmarketcommentarystillskewedtowardhybridmarkets.Onendmarkets,sentimentstillappearsmostfavorableforhybridmarketslikeFood

Beverage,whichhasbeenconsistentforthepastthreeyears.Similarly,LifeScienceswasviewedpositivelyforthesecondsurveyinarow,whichwethinkcouldbeattributabletopandemic-relatedshifts.Meanwhile,ConsumerGoods/HouseholdProductssawdeclinesintheiroutlookforexpansion,andEntertainmentandCommercial/Institutionalweretheleasttargetedindustriesforgrowth.OtherendmarketsbeingtargetedforexpansionareOil&Gas,Chemical&Petrochemicals,OEMs&IndustrialequipmentandWater&wastewater(betterthanlastsurvey).ThisendmarketsplitisfairlyrepresentativeofROKandEMR’sendmarketexposure,asROKhashigherFood&BeverageexposureandEMRismoreleveredtoOil&Gas.

Howdoesitlookversus‘14/’15?Thiscycleisclearlylessdraconianthan‘08/’09andsentimentaroundorderactivitylooksstrongerthantheoutlookduringthemildindustrial/commoditypullbackin'15.MorerespondentspointedtoB2B>1.0x.Themajorityofresponsespointedtonormaltolongerthannormalbacklog/leadtimes,whereasin'13-'15,respondentshadcharacterizedtheseasnormal.The12-monthforwardoutlookforrevenuessuggestssignificantlyhigherexpectationsofrevenuegrowthreflectingpositivesentimentsthaninanyofthe'13-'15surveyresults.Onclientcapex,responsesareslightlybetterthistime,withmostrespondentsexpectingcapextobeup0-10%,whereasin'15,mostexpected0-5%declines,andcustomersaredelayingprojectsmorethanbackthen.

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MES/IoTadoptionpickingupbutgradually.RespondentscontinuetoindicatethatadoptionofMESsolutionsispickingup,butthepaceisquiteslow,similartopriorsurveywherethetoneofresponsecommentarywasmixedassomerespondentsembracedthecloudbasedsolutionswhileothercitedlackofsupport,networkandsecurityconcerns.Butthetrendandcommentarywasmorepositiveascomparedtopriorsurveys.Roughly~15%ofrespondentsdescribedMESadoptionasminimal(versus~28%/~26%inpriortwosurveys)and~29%describeditasimprovingmaterially(vs~14%/~14%inpriortwosurveys).TheUSfocusofthesurveymayskewresponsestothedomesticsuppliersgiventheirstrongregionalposition.

Thestocks:RemainOWSiemens,SchneiderandEMR,UWonROK,andNeutralonABB.Responsesconfirmthatthingscontinuetopickupintomid-year,materiallybetterthanwhatwasfearedayearago.Thesetrendsarenotasurprisegivenwhatwejustheardaswellasguidance,andshouldbepositiveforallrelatednamesbutwepreferOW-ratedSiemensversusUW-ratedROK,aswellasOWratedEMR.ThepreferenceforSiemensisbasedonwhatweviewasitsstructuraladvantageinsoftware,whichishelpingtopullthroughsolutionsthatarechallengingROKscoreproductcentricmarkets.EMRisacheap,latecycleplaywhileABBisfullyvaluedgivenitsweakerpositioninsoftware.SchneiderhasshownaveryfastrecoveryinAutomationinrecentquartersandismore"earlycycle"butthestockremainsattractivegiventheoverallsuperiororganicgrowthoutlookandleadingfranchiseinEnergyManagement.

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20May2021

TableofContents

BriefBackgroundonSystemIntegratorsandTheirRelation

toSuppliers

5

ControlSystemIntegrators:WhatTheyDo

5

ALookatRockwell’sSalesChannel

9

OtherSuppliers:EMRMostExposedAmongProcessPlayers

13

RecentFinancialResults/MacroUpdate

19

DetailedReviewofSurveyResults

26

DemographicsandRespondentProfile

26

BusinessTrendsandExpectations

30

SoftwareTrends

47

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BriefBackgroundonSystemIntegratorsandTheirRelationtoSuppliers

Toprovidecontextaroundthesurveyresults,thesectionsbelowgiveabriefbackgroundonwhata“controlsystemintegrator”isandhowitsworkrelatestotheautomationrevenuesofthekeysuppliersinourcoverage.

ControlSystemIntegrators:WhatTheyDo

Whatisacontrolsystemintegrator?

Controlsystemintegratorsareengineeringfirmsspecializinginbringingtogethercomponentsubsystemsandprovidingabroaderautomationsolutionfortheenduser.Atypicaljobwouldinvolvetakinggeneralrequirementsorspecificationsfromacustomer,thendesigningandexecutingthedeliveryofthatspecificmanufacturingcapability,includingtherequiredhardware,software,documentation,andinstallation.Approximately40%ofatypicalsystemsintegrator’srevenuewouldbethepass-throughofequipmentpurchasedfromasupplier,whichisgivenasmallmark-up,whileacontrolsystemintegrator’s“valueadd”istheengineering/serviceprovided(typicallyrepresents~60%ofrevenue).

Roleinthesaleschannel

Asbackground,theprimarychannelsforautomationequipmentinclude1)directsalestoendusers,2)salesthroughdistributors,and3)variousindependentsalesrepresentatives,includingintegrators.Suppliersoftenprefertousedirectsalesforlargeorcaptiveaccounts,whiledistributorsmaystockmultiplebrandsormayberetainedonanexclusivebasisbyasupplierforacertainregion.Systemintegratorsarepartofthisthirdcategoryofindependentrepsandaretypicallyemployedwhenapplicationsarecomplexandproductsneedspecializedprogrammingordesign.Althoughthereareahandfuloflargerplayerswith$25-100mminsales,therearethousandsofsystemintegratorsglobally,withmosthavingrevenuesinthesub-$5millionrange.

Abriefhistoryonthedevelopmentofsystemsintegration

Priortothe1980s,instrumentationandcontrolprojectsweretypicallyhandledbyacombinationofOEMrepresentatives,electrical/mechanicalcontractors,largearchitectureandengineering(A&E)firms,andinternalengineersemployedbytheenduser.TheautomationOEMsweregenerallyaccustomedtohandlingbasicintegrationprojectssuchasprogrammingasystemtointerfacewithspecificsensorsorvalves.Ascontroltechnologydevelopedthroughthe1980s/1990s,automationsystemsbecameboth(a)morecomplex,and(b)increasingly“open”intheabilitytocombinecomponentsfromvariousvendorsintoacustomizedsystemfortheenduser.Thiscreatedanaturalopportunityforhighlyadvancedfirmsthatcouldbringtogetherthetechnologyinavalue-addedway.Simultaneoustothiswasatrendtowardconsolidationintheindustry,withendusersreducingtheirinternalengineeringheadcountandincreasinglyrelyingonoutsideexpertise.Therefore,itisnotuncommonforacontrolsystemintegratortohaveworkedforeitheranOEMsupplieroranenduserbeforemovingtoeitherjoinafirmorstarthisorherown.

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Relationshiptoendusers

Endusersvaryinthesizeoftheirinternalengineeringstaffandtheiruseofoutsidesystemintegrators.Somemanufacturingcompaniesprefertodoalltheirownprojectintegration,whileothershandleonlysmallprojectsinternally,andsomeoutsourcenearlyeverything.Thischoicewoulddependonthesizeofthecompanyandthetechnicalrequirementsassociatedwithaparticularproject.Webelievethereisatrendtowardthegreateruseofindependentsystemintegrators.

Relationshiptosuppliers

Theinteractionwithsuppliersismorenuanced,assystemintegratorscanbebothacustomerand/oracompetitor.Fromtheperspectiveofequipmentsales,systemintegratorsareakeysaleschannel(weestimatethesefirmsaccountfor$5-10Binequipmentpurchasesglobally),andautomationvendorshavemadeincreasingeffortstomarkettheirproductstothem.Althoughtheequipmentbrandusedonagivenprojectissometimesdictatedbytheenduser,anintegratorcanplayanimportantroleinselectingtheequipmentusedandmayleadwiththetechnologyofapreferredsupplier.Atthesametime,however,theinternalengineeringarmsofOEMswillsometimescompetehead-to-headwithsystemintegratorsonbids,typicallyonlargerprojectswherethereisasignificantamountofequipmentrevenuetobewon.

Endmarketandproductfocus

Systemintegratorsarepresentacrosseveryautomationendmarket,andnearlyeverysectoroftheindustrialeconomy.Althoughthereisnowidelyaccepteddataontheendmarketbreakoutofsystemintegrators’revenue,ControlEngineeringMagazineprovidesanestimatethatwereferencebelow.Importantly,theendmarketshereutilizeabroadrangeofdiscrete,process,andbatch/hybridapplications.

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Table1:EstimatedControlSystemIntegratorRevenueBreakout

Approximate%ofindustrysales(2020)

EndMarket

%ofsales

FoodBeverageorTobacco

4%

TextilesorApparel

1%

WoodPaperorPrinting

3%

PetroleumorRefining

3%

Chemicals

4%

Pharmaceuticals

3%

PlasticsorRubber

3%

PrimaryorFabricatedMetals

3%

IndustrialMachinery

6%

AlternativeEnergyEquipmentincl.SolarWindPower

3%

EngineTurbineMechanicalorElectricalPowerTransmission

Equipment

4%

ComputerSystemsorPeripherals

4%

CommunicationsSystemsorEquipment

4%

ConsumerElectronicsorAppliances

2%

SemiconductorsorOtherElectronicsComponents

2%

IndustrialControlsTestorMedicalEquipment

6%

InstrumentationMeasurementorControlSystemsorDevices

6%

ElectricalEquipment

5%

AircraftAerospaceorDefense

3%

AutomotiveorTransportation

4%

OtherManufacturing

3%

MiningAgricultureorConstruction

2%

UtilitiesorTelecommunications

3%

EngineeringorSystemIntegrationServices

6%

ScientificorResearchServices

2%

InformationDataProcessingorSoftwareServices

2%

ConsultingBusinessorTechnicalServices

4%

GovernmentorMilitary

3%

Other

1%

Source:ControlEngineeringMagazine.

Figure1:ApproximateSplitofControlSystemIntegratorRevenuesByDiscretevs.Process(2020)

BasedonControlEngineeringendmarketbreakout

Mostly

process,

~30%

Mostly

Mixed,or

discrete,

commonuse

~45%

of

batch/hybrid,

~25%

Source:J.P.Morganestimates

Geographicdynamics

NorthAmericatendstohavethemostdevelopednetworkofindependentcontrolsystemintegrators.Europe,whileasignificantmarketforautomationequipment,hastendedtohavearelativelysmallerintegratorchannelgiventhegreateruseofin-houseengineeringbyboththeequipmentproviders(Siemens,ABB)andtheendcustomers.Therefore,theseemingunder-representationofEuropeinoursurveymaybelesssignificantthanitappears.LatinAmericaisafastgrowingregionforsystemintegrators,andfirmsservingCentralandSouthAmericarepresentasignificantproportionofoursurveyresponses.InAsia,thisisalsoabigmarket,butsupplierslikeRockwellhavetalkedaboutasomewhatdifferentdynamicwheretheirchannelpartnerscommonlyfunctionasbothdistributorandsystemintegrator.Thechartbelowshowsa2012estimateofthegeographicdistributionofsystemintegratorsbyCSIA,thoughthismayunderestimatethesizeofemergingmarketstodaygivenrecentgrowthintheseregions.

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Figure2:ApproximateBreakoutofGlobalSystemIntegrators(2012CSIAEstimate)

Asia

Africa

Europe

South

America

NorthAmerica

Source:CSIA.

BriefbackgroundonCSIA

Foundedin1994,theControlSystemIntegratorsAssociation(CSIA)isanot-for-profit,globalprofessionalassociationforcontrolsystemintegrationcompanies.CSIAhasmorethan400memberfirmsin27countries.Itseekstoadvancebusinesspracticesofcontrolsystemintegration.CSIAhelpsmembersimprovetheirbusinessskills,providesaforumtoshareindustryexpertise,andpromotesbestpracticesforbusinessmanagement.Arecentsurveyofthetop100systemintegratorsshowsthatover58%ofthembelongtoCSIA.

Figure3:ProfessionalandThird-PartyAffiliationsofTop100SystemIntegrators(2016)

CSIA

58%

ISA

32%

CSIACertified

30%

UL

24%

IEEE

19%

PMI

19%

ISPE

15%

NFPAa

15%

SIHallofFame

15%

AIChE

10%

ASME

10%

ISO

9%

NSPE

9%

AWWA

5%

CSS/IEEE

5%

MESAInternational

5%

TUVRheinland

5%

AGA

4%

IMS/IEEE

4%

RIA

4%

0%

10%

20%

30%

40%

50%

60%

70%

Source:GlobalSystemIntegrator2016.

8

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ALookatRockwell’sSalesChannel

WestartwithRockwellgiventhatithaswhatisarguablythemostcomplexsetofsaleschannels.Perthediagrambelow,mostofRockwell’ssalesfollowoneofthreeavenues:directsalestotheenduser,salesthroughitsdistributorpartners,orsalestoanOEM,whichembedstheRockwellproductintoamachinethatissoldtotheenduser.

Figure4:ROKSalesChannelDiagram

Partners ROK

Distribution

OEMs Systems

Integrators

EndUsers

Source:J.P.Morgan.

Slicedanotherway,Rockwellrevenuescanbebrokenoutintothreemajorcategories:(1)maintenance(“MRO”)revenue,primarilyreplacementsalestiedtofactoryutilization;(2)directsales,eitherthrough“solutions”(largeprojectswithROKengineeringcontent)orrecurringservices;(3)OEMsalestomachinebuilders;and(4)smallprojectspending,wheretheequipmentissoldthroughthedistributionchannelbutwherethird-partysystemintegratorstypicallyprovidetheengineering/designexpertise.Intotal,weestimatethatapproximately10-15%ofROKsalesaredirectlylinkedtoprojectswithacontrolsystemintegrator.KeepinmindthattheslicesofthepierepresentingOEMsandSolutionsarealso“systemintegrator”related.Notably,OEMswillmanytimesselltheirmachinestosystemintegratorsforinstallationattheenduser,whileROK’ssolutionsbusinessisbasicallyaninternalsystemintegrationorganization.Inotherwords,systemintegratoractivityisa“proxy”for70%ofROK’ssales.

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Figure5:ROK’sEstimatedSalesBreakoutbyType

Solution/Services,30%

Othersmallprojects,15%

Solutions/Services(ROKInternal SmallProjects(DirecttoSIs)

SIs)

MROproducts,25%

OEMs,25%

OEMs(SIsManyInstallMachines)

MRO

“Solutions”(~20%ofsales)arelargecapitalprojectswhereRockwellactsastheleadintegratorandprovidesengineeringwork;book-to-billcommentaryisgiveneachquarter

Tendstobeconcentratedinemergingmarkets,wherethereislessdevelopedindependentengineering

Services(~10%ofsales)includepreventativemaintenance,remotemonitoring,networksecurity,andtraining

RecordedinCP&Ssegment

Mostsmallprojectsaresoldthroughacontrolsystemintegrator(usuallyviaadistributorpartner)

Systemintegratorwillbidonandwintheproject,thenprocureROKproduct

OtherROK“customers”herewouldincludepanelbuildersandEPCs

PrimarilysoldthroughtheA&Ssegment,withsomemotorcontrolproductsinCP&S

Salestomachinebuildersthatcompeteforbusinessfromtheenduser

LeadtimesforOEMsareanywherefrom6-12months

PrimarilysoldthroughtheA&Ssegment

SystemintegratorsinstallandintegratemachinesoncebuiltandpopulatedwithROKproducts

Basicreplacementparts,drivenbylevelofproductionandcapacityutilization(notprojects)

Willtypicallybesoldthroughdistributionpartnersgiventheproductsaresoldintoanexistingsystem

PrimarilyA&Ssegment,thoughsomemotorcontrolproductsinCP&SalsohaveanMROstreamtothem

Source:CompanyreportsandJ.P.Morgan.

Figure6:ROK'sSalesBreakout

Professionalservices

Sensia

(solutions)

Lifecycle

Motion/safety/sensing

Services

Services

Digitaltwin/InfoSoftware/Network

Intelligent

Drives/industrial

&SecuritySoftware

Devices

Software&

components

Visualization

software&hardware

Control

Logix/control

Configtoorder

products

Source:CompanyreportsandJ.P.Morganestimates.

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Table2:ROKNewSegmentationBreakout

Revenues

Offerings

(in$mm)

IntelligentDevices

3,300

Sensors,safetycomponents,motioncontrol,independentcart

Motion/safety/sensing

1,200

Drives/industrialcomponents

1,489

Configtoorderproducts

611

Software&Control

1,800

Discrete&processcontrolsoftware/hardware,robotcontrollers

Logix/control

1,100

Visualizationsoftware&hardware

430

MES/MOM,simulation/digitaltwin,security,analytics,augmentedreality,IoTvisualization,device&

Digitaltwin/InfoSoftware/Network&SecuritySoftware

270

enterpriseconnectivitynetworkinfrastructure

LifecycleServices

1,600

Consulting,Connectedservices(remotemonitoring,network&security,safetyservices,infrastructure-as-

Services

737

a-service),Maintenanceservices(assetmanagement,fieldservices,workforcetraining,othersupport

Professionalservices(solutions)

663

services)

Sensia

200

Source:CompanyreportsandJ.P.Morganestimates.

WhysystemintegratorsareimportanttoRockwellforecasting

Fromaforecastingperspective,webelievesystemintegratorsrepresentanimportantpieceofRockwell’srevenuestream.MROsalesarelargelydrivenbyproductionlevels,which,althoughvolatile,aretypicallytightlyrelatedtomacroeconomicindicatorssuchasIPandcapacityutilization.Similarly,Rockwellmanagementwillprovidecoloronthesolutionsbookingsaswellasthefrontlog–theselargecapitalprojectscanbetoughtopredictinthemediumterm,butthe3-to6-monthaveragevisibilitymakesthemmorepredictableinanygivenquarter.Thisleavesthesmallprojectwork,wheresalesarestilldependentoncapexprojectsbutwhereROKdoesnothavedirectlineofsightintothespendingapprovals.Thisiswheresystemintegrators’resultsrepresentanimportantindicatorgiventheirvisibilityintoendcustomerbehavior,inourview.TheactivityfromsystemintegratorsmayalsobeanindicatorforRockwell’slargersolutionswork.

Figure7:ROKEndMarketBreakout

%

OtherProcess

Automotive

Pulp&Paper5%

9%

Chemicals

5%

Semiconductor

Metals

5%

4%

GeneralIndustries

5%

5%

Mining,Aggregates&

Cements

5%

OtherDiscrete

Oil&Gas

9%

9%

Food&Beverage

EcoIndustrial

19%

5%

Household&PersonalCare

LifeSciences

5%

Tire

5%

5%

Source:Companyreports.

ROKacquiredleadingsystemsintegratorMaverickTechnologiestoexpanddomainknowledgeandhelpdeliverinnovativecontrolandinformationsolutionsto

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customersinindustriessuchaschemical,food/beverageandoil/gas.WegetthesensethatthisbringsROKclosertothecustomerandlikelyputsthemonacompetingscalewithothersystemintegrators.Interestingly,oneofthesurveyrespondentsfromourlastfallsurveymentionedthatthisacquisitionmakesthem“worriedaboutcompetitivepressuresfromatrustedsupplier.”

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OtherSuppliers:EMRMostExpose