Description of the event

The company published its annual report and quarterly report. In 2022, the company achieved operating income/net profit attributable to the mother/net profit after deducting non-attributable net profit of 40.97/2.75/255 million yuan, and YoY 36.16%/50.81%/90.62%. 2023Q1 achieved operating income/net profit attributable to the mother/ net profit after deducting non-attributable net profit of 10.13/0.95/075 million yuan, YoY 41.93%/3,016.70%/143,661.61%.

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In 2022, the share of new energy vehicles and optical storage businesses increased, and overseas business grew at an accelerated pace. The revenue of the company's various businesses increased to varying degrees in 2022. The revenue share of the new energy vehicle business and the photovoltaic energy storage business increased by 5.50 and 3.67 percentage points, respectively. Among them, industrial automation business revenue was 2,297 million yuan, YoY 11.82%, accounting for 56.06%; network energy business revenue was 729 million yuan, YoY 28.84%, accounting for 17.80%; NEV business revenue was 607 million yuan, YoY 116.64%, accounting for 14.82%; photovoltaic energy storage business revenue was 271 million yuan, YoY 206.60%, accounting for 6.61%. Furthermore, overseas business growth of industrial automation and network energy accelerated in 2022. Optical storage and off-grid products obtained a number of patents and registered trademarks, and were internationally competitive. Overseas business increased 44.13% year-on-year, and the growth rate increased 18.13 percentage points.

The 2023Q1 optical storage business grew dramatically, gross margin improved, and net profit grew rapidly. In Q1 2023, all of the company's businesses continued to grow. Among them, the optical storage business achieved revenue of 115 million yuan, and YoY was 291.33%, accounting for 11.39%, an increase of remarkable growth. Second, the revenue of the industrial automation business was 559 million yuan, or 29.00% of YoY, accounting for 55.15%; the revenue of the network energy business was 169 million yuan, YoY 20.79%, accounting for 16.72%; the revenue of the new energy vehicle business was 124 million yuan, an increase of 29.88% over the previous year, accounting for 12.20%. Furthermore, 2023Q1's overseas business continued to expand, with a year-on-year increase of 92.61%. Affected positively by scale effects, material prices, etc., while various businesses were fully recovering, gross margin also increased compared to the same period last year. Net profit of YoY to the mother in the first quarter reached 3,016.70%.

Industrial automation and network energy businesses are growing steadily. In terms of industrial automation, in 2022, the battery manufacturing and photovoltaic equipment market in the industry segment showed a clear growth trend. The project-based market growth rate was higher than the OEM market. At the same time, overseas markets brought more development opportunities due to the influence of geopolitical factors; the company's industrial automation business strengthened sales and management systems, improved service quality and efficiency, and actively expanded the market; launched a number of R&D achievements. In the future, as the sales and management system became more mature, the business is expected to grow steadily. In terms of network energy, in 2022, UPS product line companies promoted breakthroughs in many major industries in the domestic market, and overseas business grew rapidly; the temperature control product line achieved comprehensive development and sales of precision air conditioning and integrated data center products. In the future, with the company's product upgrades, production line enrichment, and application expansion, the business is expected to continue to grow.

The new energy vehicle and optical storage business took advantage of the momentum. In terms of new energy vehicles, the driving company increased its capital and shares in 2022 to promote development. Through technological and structural innovation, the company promoted the development of products towards integration, from a single electronic control, power supply, and motor product to drive assemblies, high pressure box assemblies, etc., and further expanded to “four in one” and “five in one” products. The level of integration continued to improve, breaking through passenger vehicle project targets and receiving orders in batches. In terms of optical storage, the company continued to launch new products in 2022. The main products of the XG series were developed and launched, and a new generation of low-power energy storage XD series products were launched and marketed. The company's photovoltaic products were widely used in regions with sufficient sunshine, such as Europe, the Middle East, Australia, and Southeast Asia, and the market response was good. Furthermore, with the gradual expansion of the scale of the NEV and optical storage business, the profit situation is expected to improve further.

Investment suggestions: The company has been established for more than 20 years, the organizational structure has been continuously optimized, internal governance has been continuously strengthened, core members have been deeply involved in the industry, and many equity incentive plans have enhanced their centripetal strength. In terms of business, with the gradual recovery of domestic and overseas markets, the company's business is expected to fully recover. Among them, the two major businesses of industrial automation and network energy are growing steadily, while the two major growth businesses of new energy vehicles and optical storage are growing rapidly, profits are expected to improve further. Furthermore, the company continues to strengthen its ability to reduce costs, manage production and inventory, and manage internal risks to further enhance its ability to innovate and the level of governance. The company's 2023-2025 EPS is expected to be 0.60/0.85/1.01, corresponding to the company's April 17 closing price of 12.15 yuan, and 2023-2025 PE is 20.2/14.4/12.0 respectively, maintaining the “increase in holdings - A” rating.

Risk warning: macroeconomic and policy risks; market competition risks; brain drain risks; raw material price fluctuations and scarcity risks, etc.