Core views

The company's performance continues to grow rapidly, and is expected to benefit from the continued increase in the company's share in the power grid market. At the same time, chip projects such as smart photovoltaics and smart homes are progressing in an orderly manner. Furthermore, the company's on-hand orders increased by more than 50% compared to last year, and the amount is expected to exceed 282 million yuan (on June 30, 2022, the company's on-hand orders are 188 million yuan). The company is one of the first manufacturers to pass the State Grid dual-mode inspection. In the context of a complete shift in State Grid procurement to dual-mode, the company is expected to seize the opportunity and expand its market share.

occurrences

Recently, the company released its 2023 mid-year report performance forecast. It expects to achieve revenue of 253 million yuan for the half year of 2023, an increase of 13.39%; achieve net profit of 50 million yuan to 53 million yuan, an increase of 57.52% to 66.97%; and achieve net profit of 4.4 million yuan to 47 million yuan after deducting non-return mothers, an increase of 132.71% to 148.57% over the same period last year.

Brief review

1. Net profit after deducting non-return parents has increased dramatically, and there are plenty of orders on hand.

The company expects to achieve revenue of 253 million yuan in 2023H1, an increase of 13.39%; achieve net profit of 50 million yuan to 53 million yuan, an increase of 57.52% to 66.97%; and achieve net profit of 4.4 million yuan to 47 million yuan after deducting non-return mothers. Compared with the same period last year, the company expects a year-on-year increase of 132.71% to 148.57%. Looking at a single quarter, according to median estimates, 2023Q2 achieved revenue of 142 million yuan, an increase of 12.98%; realized net profit of 30.17 million yuan, an increase of 65.16% over the previous year; and realized net profit of 25.36 million yuan, an increase of 171.69% over the previous year. The company's performance continues to grow rapidly, which is expected to benefit from the continued increase in the company's market share of electricity information collection in power grids. At the same time, chip projects such as smart photovoltaics and smart homes are progressing in an orderly manner. Furthermore, the company's on-hand orders have increased by more than 50% compared to last year, and the amount is expected to exceed 282 million yuan (on June 30, 2022, the company's on-hand orders are 188 million yuan).

2. The HPLC+HRF dual-mode chip has been tested by the State Grid and has been supplied in batches.

The State Grid's bidding has completely switched to a dual model, and the company is expected to seize market opportunities and expand its share.

In the fourth quarter of 2022, the State Grid Corporation officially stopped bidding for HPLC communication modules and launched the bidding for HPLC+HRF high-speed dual-mode communication modules. At the beginning of 2022, the company developed “HPLC+HRF” high-speed dual-mode communication chips that meet the national grid dual-mode interconnection technical specifications, and passed the first batch of chip-level interconnection tests and module-level full performance tests. In 2022, the company continued to win bids and achieve batch supply in the State Grid HPLC+HRF high-speed dual-mode product tender. In 2023, the company fully exploited market opportunities and relied on technical advantages and supply chain advantages to strive for greater market share. Regarding the market's concerns about the state grid dual-mode bidding budget not increasing, the company said that cost factors were fully taken into account when developing dual-mode products, and strict cost control was carried out. If the prices of dual-mode products and single-mode products did not change, there would be a certain impact on gross margin, but the overall impact would not be significant.

3. The non-electricity market is expected to open up the company's second growth curve, focusing on expanding fields such as photovoltaics and smart homes.

The smart photovoltaic series PLC chips and solutions in the company's convertible debt fundraising project mainly meet the needs of photovoltaic power plants in terms of photovoltaic power generation safety control and information monitoring. In terms of safety control of photovoltaic power generation, in the face of high DC voltage in photovoltaic power generation modules, which may lead to electric shock in operation and maintenance, fire, rescue electric shock, etc., a circuit breaker containing a smart photovoltaic PLC chip can quickly shut down the connection between the photovoltaic modules in an emergency and eliminate the DC high voltage present in the photovoltaic power generation system; in terms of photovoltaic power generation information monitoring, photovoltaic panels containing smart photovoltaic PLC chips can monitor and collect their working state in real time, thereby optimizing the efficiency, operation and management of power generation.

In the smart home whole-house intelligent/smart home appliance control market, the company uses PLBUS technology and chips to create a unified communication interface based on power lines for various home appliances, uses the advantages of power line communication to solve the problem of smart device access across rooms and floors and the inability to uniformly manage and control home appliances from different manufacturers, so as to achieve whole-house connection and control. The equipment covered includes various household appliances, kitchen appliances, smart lighting, smart sockets, security equipment, etc. The products provided include chips, modules, complete solutions, etc., creating a leading domestic brand in this field.

4. Profit prediction and investment advice.

As digital grid construction accelerates and the share of investment on the distribution side increases, demand for power carrier chips, modules and terminals is expected to increase. As one of the main suppliers of domestic power carrier communication chips, the company is expected to fully benefit. The company is one of the first manufacturers to pass the State Grid dual-mode inspection. In the context of a complete shift in State Grid procurement to dual-mode, the company is expected to seize the opportunity and expand its market share. In addition, the company's on-hand orders are full. Currently, on-hand orders exceed 282 million yuan, and non-electricity markets such as photovoltaics are also expected to ship on a large scale. We expect the company's net profit from parent to parent in 2023-2025 to be 130 million yuan, 190 million yuan, and 260 million yuan respectively, corresponding to PE being 35X, 24X, and 17X, maintaining the “buy” rating.

5. Risk warning: The scale and progress of power grid investment falls short of expectations. The company's downstream customers are mainly State Grid and South Network, which are greatly affected by the State Grid and South Grid tenders.

State Grid dual-mode tenders have begun, but provincial network companies may not increase their budgets and still hope to purchase dual-mode products at single-mode prices, which may lead to a decline in manufacturers' gross margins. Since then, the number of manufacturers that have passed dual-mode certification has increased, and competition in the industry has intensified. In addition, channel concessions, product structure changes, etc. will also affect gross profit margins.

Expense control falls short of expectations, affecting the company's net interest rate, etc. In markets such as photovoltaics, charging piles, and smart homes, initial R&D investment is high. If market expansion falls short of expectations, it may affect net interest rates.