Main points of investment

Event: the company released its mid-2023 report, with operating income of 439 million yuan, year-on-year of-3.83%, and net profit of 32 million yuan, + 505.26% of the same period last year.

Comments:

Deduct non-net profit under short-term pressure and improve profitability. In the first half of 2023, the company achieved a net return of 32 million yuan, an increase of 505.26% over the same period last year; the net profit after deducting it was-10 million yuan,-60.53% over the same period last year, mainly due to Liaoyuan Hongtu's performance commitment to recover the fair value change income of the compensation shares. During the reporting period, the comprehensive gross profit margin was 27.45%, which was + 5.49pct compared with the same period last year. From a product point of view, the revenue of ring cabinets in the first half of 2023 is 134 million yuan, year on year + 35.55%, gross profit 33.56%, year on year + 1.32pct; revenue of high and low voltage complete sets of security cabinets is 78 million yuan, year on year + 10.52%, gross profit margin 31.83%, year on year + 6.95pct; revenue of box substation is 59 million yuan, year on year + 55.65%, gross profit 28.87%, year on year + 4.05pct Charging pile realized revenue of 52 million yuan, year-on-year + 12.30%, gross profit margin 20.06%, year-on-year + 9.35pct. The company actively develops the recharging market and energy storage application field, and the expense rate during the period is 31.75%, year-on-year + 9.4pct, which increases significantly, of which the sales and management expense rate (including R & D) is 13.31% and 17.19%, which is a drag on performance compared with the same period last year with + 4.39pct and + 4.48pct. With the breakthrough of the company's new business and the delivery of orders on a large scale, the expense rate is expected to be optimized and the company's performance will continue to improve.

The scale of grid investment has increased, and the business of smart grid has grown steadily. According to data released by the China Power Union, the investment in the construction of the national power grid project in the first half of the year was 205.4 billion yuan, an increase of 7.8 percent over the same period last year. Grid investment is the core driving force to promote the development of power equipment industry, and the continuous increase in the scale of power grid investment will be beneficial to the rapid development of the industrial chain.

In August 2023, the company announced the winning bid for related projects of State Grid, Southern Power Grid, Inner Mongolia Electric Power, Changchun Metro, Pinggao Group and other companies, with a total bid amount of about 168 million yuan. the products involved are switchgear, high voltage switchgear, ring cage and box substation. The company's smart grid equipment business has a good momentum of growth. At the same time, the arrival of a new meter replacement cycle of smart meters and the emergence of new business type, such as virtual power plants, also provide a new growth point for business development and a broad market space.

Orders continue to land, energy storage and recharging business is worth looking forward to. In the first half of 2023, the energy storage sector, the company actively layout Guizhou, Guangdong, Zhejiang, Jiangsu, Henan, Shandong and other markets, orders developed smoothly. Xu Ji Group won the bid for the 190MWh project in the Electric Energy Storage Department, with a bid amount of 236 million yuan, which is the first case of the company's energy storage project in the supercomputing center, expanding the downstream field of the energy storage business. Recharging equipment plate, the company launched a mobile portable charger product, which is used in Hangzhou Asian Games as an emergency power supply product. At the same time, we will speed up the expansion and layout of overseas business. At present, we have completed the on-site survey of some sections of the "Life supply Line". At present, we are conducting technical docking and business negotiations with the Russian project side. In the future, the company's energy storage and recharging business is worth looking forward to.

Investment advice: optimistic about the company's energy storage and recharging and other new energy business development, overseas market breakthroughs are worth looking forward to. We maintain the profit forecast and forecast that the net profit for 2023-25 is 1.74,2.67 and 463 million yuan respectively, corresponding to EPS 0.21,0.32 and 0.56 yuan, and PE 32,21,12 times, maintaining the "buy" rating.

Risk tips: 1. The installation of new energy is lower than expected. 2. Financial risk. 3. The order is not as expected.