Key points of investment
Incident: The company's revenue in 2022 was 5.87 billion yuan, an increase of 28% over the previous year, and the net profit of the mother was 324 million yuan, an increase of 21% over the previous year. The performance was in line with expectations.
Performance: The company's overseas business grew rapidly, and the electric AMI business, communication and fluid AMI business grew steadily. The performance was in line with expectations. The company achieved revenue of 5.87 billion yuan (yoy +28%) and net profit of 320 million yuan (yoy +21%) in 2022. The performance was in line with expectations. 1) By business, the electric AMI business, communication and fluid AMI business grew steadily, the ADO business grew rapidly, and the three major businesses were established. In 2022, revenue from the electric AMI/communication and fluid AMI/ADO business increased 20%/11%/64%, respectively, accounting for 35%/33%/32% of total revenue, and -2/-5/+7pct over the previous year. 2) By customer type, domestic grid/non-grid customers are growing steadily, and overseas customers are developing rapidly. In 2022, the company's domestic grid/non-grid/overseas customer revenue was 24/22/1.2 billion yuan (yoy +19%/20%/73%) respectively, accounting for 41%/38%/21% of total revenue, compared to -3/-3/+6pct.
Fee rate: The company continues to invest in R&D to increase its core competitiveness, and we expect the R&D cost rate to remain stable in the future.
The company's expense ratio is well controlled. The sales expense rate/administrative expense rate/R&D expense ratio in 2022 was 8.8%/3.7%/9.9%, respectively, compared to -0.7/-0.2/+0.7pct. The company's net interest rate declined slightly due to the increase in R&D costs/sales costs/financial expenses. The company's net sales margin in 2022 was 8.7% (yoy-0.6pct), but the increase in asset turnover led ROE to 7.0% (yoy+1.1pct).
Outlook: We expect the domestic scale of the electric AMI business to grow steadily and expand rapidly overseas in the future. We are optimistic that the subsequent communication and fluid AMI business and ADO business will rapidly expand volume through key customer expansion, forming a second growth pole. 1) Electric AMI's business company is leading and steady. The domestic business scale is expected to continue to grow steadily with Guonan Grid's “14th Five-Year Plan” investment exceeding 2.9 trillion yuan, while the overseas “Belt and Road” power grid construction needs to be updated urgently. The company's top three overseas customers in 2022 were Mexico, Egypt, and Brazil. It is expected that the company will continue to develop markets in 2023 through localization strategies and strategies to radiate neighboring countries. With the exception of Mexico and Egypt, the Middle East market in advantageous regions such as Mexico and Egypt may be expected to be pleasantly surprised. 2) Weisheng Information, a subsidiary of the communications and fluid AMI business, is a leader in the Internet of Energy and Things, actively promoting the development of cities, enterprises and industrial parks to achieve digital transformation and upgrading; 3) The ADO business actively develops Internet+new energy+energy storage product solutions to achieve integrated application of source network load storage. Cooperation between the company and major customers is expected to expand further in the future, forming a scale effect.
Profit forecast and investment rating: Based on the company's leading position in the energy Internet of Things and good prospects for industry development, we adjusted the company's 2023-2024 EPS forecast value to 0.39/0.47 yuan (previous value was 0.37/0.50 yuan), adding the 2025 forecast value EPS 0.61 yuan, corresponding PE 7/6/5 times, respectively, maintaining the “buy” rating.
Risk warning: The scale of power grid investment falls short of expectations, the pace of power grid company bidding does not meet expectations, company order execution falls short of expectations, etc.