Incident: The company released its 2023 semi-annual report. 23H1 achieved revenue of 250 million yuan, an increase of 13.4% over the previous year; realized net profit of 50 million yuan, an increase of 59.4% over the previous year. In the 23Q2 quarter, we achieved revenue of 140 million yuan, an increase of 13% over the previous year, and net profit of 0.3 million yuan from the previous year, an increase of 60.3% over the previous year.
The power grid sector has benefited from dual-mode applications, increasing market share and steady growth in performance. In the first half of 2023, the company's products were actively promoted in the electric and non-power IoT markets, and achieved excellent results, leading to steady growth in performance. In terms of the power Internet of Things, benefiting from the switch of power grid communication unit products from HPLC to high-speed dual mode, the company's share in the State Grid and South Grid continued to increase. In the first half of '23, the company achieved revenue of 240 million yuan in the smart grid field, an increase of 12.8% over the previous year. In terms of non-power IoT, the company has stepped up its market development efforts and continued to expand new customers in the fields of intelligent management of new energy (such as photovoltaic module level shutdown, photovoltaic optimizer, micro-inverse intelligence, etc.), smart home appliances, smart lighting (street lights, tunnels, commerce, education, home lighting, etc.), and digital smart power supply (charging piles, 5G base stations, etc.), laying a solid foundation for business expansion. In the first half of '23, the company achieved revenue of 13.442 million yuan in the non-electric IoT sector, maintaining a year-on-year growth trend. Furthermore, the company continues to win bids for the high-speed rail intelligent electricity management system, and the project has already been implemented. In the first half of 2023, the company's on-hand orders reached 3.1 billion yuan, an increase of 63.8% over the previous year, and various businesses maintained steady growth.
Costs continue to be optimized, and profit levels have reached a new level. In terms of expenses, in the first half of '23, the company's four comprehensive expenses rate was 22.5%, a year-on-year decrease of 6.7 pp. Among them, the sales expense ratio is 8.8% (yoy+0.5pp), the management expense rate is 4.8% (yoy-0.4pp), the financial expense ratio is -1.5% (yoy-1.5pp), and the R&D expense ratio is 10.5% (yoy-5.3 pp), and the cost control effect is remarkable. In terms of profit margin, in the first half of the year, the company achieved a gross profit margin of 41.2%, yoy+1.8pp; a net interest rate of 20%, yoy+5.8 pp. The reason for the sharp increase in the company's net interest rate level is that the company's revenue has increased and expenses are well controlled, and some R&D project expenses have been capitalized.
After 20 years of deep accumulation, the non-electricity sector has set sail again. The company has been deeply involved in the field of PLC technology and chips for 21 years, has mastered many core technologies, has a rich product matrix and complete solutions, and is in a leading position in the industry.
In the first half of '23, the company's next-generation PLC chips and HPLC+HRF dual-mode chips were developed and delivered in batches; PLC SoCs for the face-phase consumer IoT market were successfully distributed; wireless communication chips for power were mass-produced and sold; and other projects such as IoT application development and photovoltaic PLC SoC chips were also made.
The company has won many awards in the field of smart home appliances, and PLC technology has gradually been recognized by the home industry. The company has developed all-round cooperation with AO.SMITH, Lenovo, Tencent, etc. in Whole-House Intelligence, and is also cooperating with other well-known brands one after another. According to the State Grid and China Southern Power Grid, during the “14th Five-Year Plan” period, the investment amount for the State Grid distribution grid will exceed 1.2 trillion yuan, and the investment amount for the Southern Grid distribution grid will be greater than 320 billion yuan. The company's basic market on the power grid side is stable. Non-grid fields such as smart homes, industrial internet, photovoltaic power generation, and charging piles are developing well. With more effort, the company is expected to make new breakthroughs in the non-electric field.
Profit forecast and investment advice: EPS is expected to be 1.28, 1.79, and 2.59 yuan in 23-25, respectively. Referring to comparable companies, the company was given 28 times PE in 24 years, corresponding to a target price of 50.12 yuan, and maintained a “buy” rating.
Risk warning: There are risks such as the amount of power grid investment falling short of expectations, and the development of the non-electric IoT market falling short of expectations.