Introduction to this report:

Performance was in line with expectations, revenue and profits increased significantly, and on-hand orders grew steadily. High-speed dual-mode communication chips in the power grid market have passed the national grid test and are waiting for dual-mode products to be released. Vigorously deploy non-grid markets such as photovoltaics and charging piles.

Key points of investment:

Adjust profit forecasts to maintain target prices and increase holdings ratings. Considering the impact of the pandemic on the overall pace of grid investment, the 2023-2024 net profit forecast was lowered to 128/1.81 million (previous value was 155/246) million yuan, and the 2025 forecast was increased to 260 million yuan. The corresponding EPS was 128/1.81/2.59 yuan respectively. Considering that the company is in a large-scale smart grid construction cycle for high-speed power line communication and continues to expand into non-grid fields, its performance grew rapidly, maintaining the target price of 59.82 yuan and the increase in holdings rating.

Performance was in line with expectations, revenue and profits increased significantly, and on-hand orders grew steadily. The company's smart grid business achieved revenue of 485 million yuan, +58.2% year on year; the non-power IoT business achieved revenue of 169.03 million yuan. The amount of orders in hand as of the end of 2022 was $214 million, up 20.02% from the previous year.

High-speed dual-mode communication chips in the power grid market have passed the national grid test and are waiting for dual-mode products to be released. In 2022, the State Grid vigorously promoted the implementation of high-speed dual-mode technology and products. The company closely followed the State Grid high-speed dual-mode standard technology route and the State Grid promotion plan. The high-speed dual-mode communication chips (LME3960) under the previous fund-raising project passed the China Grid Corporation's first batch of high-speed dual-mode chip-level connectivity tests in 2022, achieving a major breakthrough.

The share of revenue is expected to increase this year by vigorously deploying non-grid markets such as photovoltaics and charging stations. The company lays out intelligent management of new energy sources (such as photovoltaic power generation monitoring, etc.), comprehensive energy efficiency management (high-speed rail, park/building, etc.), smart home appliances & whole house intelligence, smart lighting (street lights/tunnel/commercial/education/home lighting, etc.), and digital management of smart power supplies (charging piles, 5G base stations, etc.), laying a solid foundation for the rapid development of the company's non-power IoT business.

Risk warning: The degree of dependence on power grid companies is high, and business development in the non-grid market falls short of expectations.