Incidents:
Dongfang Electric released its report for the first quarter of 2023:2023Q1 achieved revenue of 14.72 billion yuan, +4.3% year on year; achieved net profit of 1.02 billion yuan, +10.0% year on year; achieved net profit of 950 million yuan after deduction, +43.9% year on year.
Key points of investment:
Profitability has steadily increased. The net profit growth rate of the 2023Q1 company was higher than the revenue growth rate. The net interest rate was +0.43 pct year on year, reaching 7.49%, a record high since 2019. One is because the gross margin was +1.2pct year over year, and the second was because the period expense ratio was -0.9 pct year-on-year (10.1%). Among them, the sales/management expenses ratio was -0.6/-0.8pct (1.97%/4.5% respectively).
Looking ahead, we believe that the increase in the price of thermal power mainframe is expected to drive the company's gross margin increase. Combined cost reduction and efficiency will continue to advance, and there is still room for the company's net interest rate to increase.
Judging from the net profit margin returned to the mother after deduction, 2023Q1 grew 43.9% year on year, and it still maintained a high growth rate. However, the growth rate of Guimu's net profit was lower than the growth rate of net profit after deduction, mainly because non-recurring profit and loss decreased by about 200 million yuan over the same period last year. 2023Q1's other earnings were $24 million, a year-on-year decrease of $126 million, mainly due to debt restructuring income of 136 million yuan in the same period last year, which was not the case this year; 2023Q1's credit impairment loss was 170 million yuan, an increase of 220 million yuan over the previous year, mainly because it received impairment from bankruptcy allocations in the same period last year, which was not the case this year.
2023Q1 added orders of RMB 22.615 billion, +26.06% over the same period last year. Among them, clean and efficient energy equipment amounted to 8.50 billion yuan, accounting for 37.58%; renewable energy equipment amounted to 6.03 billion yuan, accounting for 26.66%, engineering and trade amounted to 2.58 billion yuan, accounting for 11.42%; and emerging growth industries amounted to 3.42 billion yuan, accounting for 15.12%. Looking ahead to 2023, we believe that the tender volume of thermal power mainframe tenders is expected to exceed expectations, and that the company's orders are expected to continue growing rapidly, driving rapid growth in performance.
Profit forecast and investment rating: Without considering the impact of the company's fixed growth and acquisitions, we expect the company's net profit to the mother in 2023-2025 to be 391/50.1/5.81 billion, respectively, and PE 14/11/9 times respectively. Maintain a “buy” rating.
Risk warning: Risk of policy changes; sharp rise in coal prices; sharp decline in electricity prices; power supply installations fell short of expectations; industry competition intensified; price increases for the three major mainframe companies fell short of expectations; tenders fell short of expectations; and fixed growth fell short of expectations.