Incidents:
The company announced its semi-annual report for 2023. 23H1 achieved operating income of 2,826 million yuan, a year-on-year decrease of 4.12%, a year-on-year increase of 8.19%, net profit of 250 million yuan, a year-on-year increase of 8.19%, after deducting non-homologated net profit of 211 million yuan, a year-on-year decrease of 4.50%, slightly lower than the previous performance forecast (+8.41%, minus -4.27%). The main reason why net profit growth rate was higher than net profit not attributable to parent net profit was that non-operating income increased by about 40 million yuan over the same period last year.
Key points of investment:
In the first half of the year, gross margin remained the same year on year, and the cost ratio increased slightly. The company's 23H1 overall gross profit margin was 18.75%, which was basically the same as the same period last year (18.83%), and the overall cost ratio was 12.45%, a slight increase of +0.64pct over the previous year. Part of this increase was mainly due to the R&D expense ratio (4.14%, +0.69 pct year on year), while benefiting from a decrease in short-term loans, the financial expense ratio decreased by 0.19 pct year on year.
Due to factors such as changes in the pace of information and communication collection, the cloud network infrastructure business has declined markedly. Cloud network infrastructure is the most important business segment of the company. 23H1 achieved revenue of 1,549 billion yuan (-25.22% year-on-year), a significant decline. According to the company's announcement, in terms of power grid central station services, the company has completed the installation and deployment of the four components of the Alibaba marketing 2.0 business verification environment in Hebei and other provinces. In terms of power grid digital infrastructure services, we are actively promoting the implementation of key data center projects such as the Ningxia Electric Power Data Center, the State Grid Tibet Electric Power Company's comprehensive data housing, and the Ningshan Lhasa Data Center Phase I Phase II. Continue to consolidate the traditional operation, maintenance and maintenance business market for the headquarters, branches, and directly subordinate units of the State Grid Corporation. The company is one of the most important suppliers of UHV communication projects for the State Grid. Since the beginning of this year, UHV construction has accelerated markedly. It has approved the commencement of projects such as Chuan-Chongqing UHV, Jinshang-Hubei, Longdong-Shandong, Hami-Chongqing, and Ningxia-Hunan. The number is significantly higher than last year, and is expected to contribute more revenue in the future.
Support the digital construction needs of State Grid enterprises and actively expand external units and users. The company's digital business achieved revenue of 552 million yuan in the first half of the year, -13.97% year-on-year, which is also related to factors such as changes in the pace of information and communication collection. According to the company's announcement, the company continues to deepen the construction of iState Grid applications, with 1.5 million registered users and a peak daily activity of nearly 700,000, focusing on research and development of the “intelligent logistics” series of core products. The efficiency of digital power supply supports the efficient operation of 872 power supply stations in Sichuan. In terms of digitization of enterprise operations, next-generation enterprise portals combine the construction of grass-roots digital service centers to further promote grass-roots business integration and build exclusive workbenches. The unified authority added more than 1,000 external units to manage, more than 180,000 external users, and increased the number of external users to 1.38 million.
The marketization of electricity is progressing steadily, and the prospects for the digital power business are broad. The power digitization business 23H1 achieved revenue of 713 million yuan, +215.86% year-on-year, with impressive growth rates. According to the company announcement, the “Baseline +” version of the company's marketing 2.0 unified software has been launched in 6 provinces, and marketing 2.0 construction work has begun in Ningxia, Hebei, Jiangxi, Chongqing and other places. Furthermore, since this year, the market-based construction of electricity in China has accelerated markedly. The functions of the company's next-generation power trading system have continued to deepen. The volume of green license transactions has increased markedly, and the cumulative transaction volume has exceeded 2.5 million. The national carbon emission monitoring and analysis service platform successfully passed the inspection by the National Development and Reform Commission. It supports carbon emission estimation for 7 major industries, including energy and industry, across the country and 31 provincial administrative districts, and serves the “double carbon” target through digitalization.
Investment analysis: The company undertakes the heavy responsibility of building state grid information and communication networks and digital power grids, and is expected to continue to benefit in the context of digital grid construction and the promotion of electricity marketization. We slightly lowered our profit forecast for 23-25. We expect the company's net profit to be 9.1 billion, 1.06 billion, and 1.26 billion yuan respectively in 2023-2025 (the original forecast was 980 million, 1.18 billion, and 1.4 billion). Currently, the stock price corresponds to 2023-2025 PE 20 times, 17 times, and 14 times, respectively, maintaining the “buy” rating.
Risk warning: digital grid construction falls short of expectations, power grid engineering construction falls short of expectations