On May 24, the company issued an announcement. The company signed a memorandum of cooperation with the Middle East Representative Office of the Russian Federation Chamber of Commerce and Industry to cooperate to build a new energy light-storage-charging-exchange complex in Central Asia.

The scale of the project is large, which is expected to significantly support the growth of the company's performance

The project revolves around a proposed highway between Iran and Russia called the “Life Supply Line”. The main line is 3,500 kilometers long. It is planned to set up an optical storage and charging station in each direction every 100 kilometers. The main line is expected to invest in the construction of 70 stations, with a total investment of 1.4 billion yuan. The length of the planned branch line in the future is 170,000 kilometers. If the main line plan is used to build stations, it is estimated that 3,400 stations will be built and invested. The total investment is expected to reach 68 billion yuan. The company's total revenue in 2022 was 1,166 billion yuan. The implementation of future projects is expected to significantly enhance the company's performance and support rapid growth in future revenue scale.

Charging and switching technology has accumulated a lot, and the company's charging and switching sector has cutting-edge technologies such as high-power fast charging, V2X charging and switching, flexible intelligent charging, Internet+ intelligent charging, and orderly charging. Orders for liquid-cooled supercharging products have already been delivered. The company's charging and switching business revenue in 2022 was 222 million yuan, +68.25% year on year; sales of charging stations were 27,150 units, +81.7% year on year.

The company simultaneously entered the supply systems of the State Grid and South Grid in the domestic market, actively promoted European standard certification of products in overseas markets, and expanded overseas business through customer channels, agents, etc. We believe that the company's subsequent development of overseas charging and switching markets is expected to continue to drive high sales volume and further increase gross profit margins.

Traditional businesses are growing steadily, and energy storage capacity construction is accelerating

Since '23, the company's traditional power equipment sector has won bids for various projects of the State Grid and its subsidiary power grid companies, totaling about 160 million yuan. The company accelerated the layout of the new energy business, signed more than 60 million yuan energy storage system and integrated optical storage contracts; signed strategic cooperation agreements with companies such as Ronghe Yuan Storage and Jiangsu Baolong Equipment, which are affiliated with China Power Investment, involving 680 million yuan of 80MW wind storage integrated system integration projects. The company is speeding up the construction of a 4 GWh energy storage pack production line and an annual output of 500 MW inverter production line to meet market demand, which is expected to form a new growth curve that will support the rapid development of the company's subsequent performance.

Profit Forecasts, Valuations, and Ratings

We expect the company's revenue for 2023-25 to be 25.22/41.92/5.699 billion yuan respectively. The corresponding growth rate will be 116.27%/66.25%/35.95% respectively, and the net profit of the parent will be 1.68/286/468 million yuan respectively. The corresponding growth rate will be 248.85%/69.96%/63.76%, the three-year CAGR will be 113.3%, EPS will be 0.20/0.35/0.57 yuan/share respectively, and the corresponding PE will be 28/17/10 times respectively. Referring to comparable company valuations, we gave the company 35 times PE for 23 years, with a target price of 7.11 yuan. Maintain a “buy” rating.

Risk warning: The actual implementation of the intended agreement fell short of expectations; production capacity fell short of expectations; overseas certification of charging stations fell short of expectations; industry competition intensified.