Incidents:
The company released a report: 2023Q1 achieved revenue of 570 million yuan, an increase of 48% over the previous year; realized net profit of 80 million yuan to the mother, an increase of 119% over the previous year.
Comment:
The price of silicon steel has risen, and the performance is in line with expectations: the company's 2023Q1 profit level was the best in the same period in history. Considering the seasonality of the company's sales, the performance is in line with our expectations. In terms of silicon steel products, the sales price of 2023Q1 increased significantly year-on-year, leading to a sharp increase in the revenue scale and gross profit of silicon steel products; in terms of transmission, distribution and control equipment products, the company continued to seize favorable opportunities in the new energy market and continue to optimize the customer structure.
Oriented to silicon steel: A new 80,000-ton project was released this year, and the commissioning of processing production lines is expected to lengthen the value chain.
Domestic equipment for the 80,000-ton new materials project invested by the company is expected to be in place in June 2023. At that time, it is estimated that 20,000 to 30,000 tons of production capacity will be added per year. Key imported equipment is expected to be put in place in June 2024. Production capacity of 50,000 to 60,000 tons will be added that year, and production is expected to be reached in 2025. The company's low iron loss and high magnetic induction silicon steel core intelligent manufacturing project was completed and put into operation in March 2023. The project design and processing capacity is 30,000 tons, which is expected to extend the silicon steel value chain.
Power transmission and distribution equipment: accelerate progress and enjoy industrial chain collaboration. The company's IPO fund-raising projects are: intelligent complete electrical equipment industrial base construction project, energy-saving transformer intelligent plant technology improvement project of 110kV and below, intelligent manufacturing project of silicon steel core with low iron loss and high magnetic sensitivity, R&D center construction project, and supplementary working capital project. Among them, after delivery, the intelligent complete electrical equipment industrial base construction project will achieve the production capacity of 1,500 box-type substations per year and the production capacity of 25,000 sets of complete electrical equipment per year; after the technical improvement project of the energy-saving transformer intelligent plant of 110 kV and below is fully completed, the company will achieve the production capacity of 1,800 dry-type transformers per year, and the production capacity of 1,500 oil-immersed transformers will be added every year.
Profit forecast and investment rating: We forecast the company's revenue for 2023-2025 to be 30/36/41 billion yuan, with a year-on-year growth rate of 19%/20%/14%; based on the 2023Q1 performance in line with expectations, we maintain the 2023-2024 profit forecast, that is, the company's net profit returned to the mother in 2023-2025 was 41/58/ 700 million yuan, with a year-on-year growth rate of 38%/41%/21%; the corresponding PE was 17/12/10x, respectively. Considering that the company's focus on silicon steel accounts for a relatively high share, production capacity is expanding rapidly, and valuations are low, it maintains a “buy” rating.
Risk warning: Facing fluctuations in silicon steel prices; project progress falls short of expectations; demand falls short of expectations.