Performance was in line with expectations, and 2023Q2 gross margin declined slightly
Dongfang Electric released its semi-annual report for 2023. The company achieved total revenue of 29.915 billion yuan in 2023H1, yoy +7.2%. Net profit attributable to parent was 2,002 billion yuan, yoy +12.9%, net profit not attributable to parent was 1,819 billion yuan, yoy +26.5%. H1 totaled $324 million in credit impairment losses, of which Q1/Q2 amounted to $172/152 million respectively. Asset impairment losses amounted to $144 million, and Q1/Q2 amounted to $0.85/ 059 million respectively. H1 exchange gains were $76 million. Among them, 2023Q2 achieved total operating income of 15.20 billion yuan, QOQ +3.3%, yoy +10.1%, net profit of 980 million yuan, QOQ -3.5%, and yoy +15.9%. The gross margine/net margin of 2023Q2 was 17.1%/6.8%, -0.8 pct/-0.7 pct, respectively, and the sales/management/development/finance expense ratio was 2.6%/4.5%/3.6%/-0.6%, respectively, 0.65/-0.03/+0.1/-0.73 pct, respectively. As the company's business orders in a high boom cycle are delivered one after another, performance during the year is expected to be gradually fulfilled. Therefore, we raised the company's profit forecast for 2023-2025 to be 40.49/51.82/6.215 billion yuan (originally 38.26/51.36/6.122 billion yuan), EPS is 1.30/1.66/1.99 yuan, corresponding to the current stock price PE is 12.8/10.0/8.4, maintaining the “buy” rating.
New orders are growing steadily, and orders for thermal power equipment are impressive
In 2023H1, the company achieved additional orders of 48,857 billion yuan, yoy +33.29%. Among them, new orders for high-efficiency clean energy equipment were 20.99 billion yuan, accounting for 42.96%, new orders for the new energy equipment business were 11.55 billion yuan, accounting for 23.65%, and new orders for engineering and trade were 5.72 billion yuan, accounting for 11.7%. The modern manufacturing service business added 4.52 billion yuan in orders, accounting for 9.25%, and the emerging growth business added 6.07 billion yuan in new orders, accounting for 12.43%.
The total number of orders achieved steady growth in the first half of 2023. Among them, there was a marked increase in high-efficiency clean energy equipment, mainly thermal power equipment. The number of new orders added during the year was already close to the level for the whole of last year.
The construction of a new power system is progressing steadily, and it is expected that pumping and storage spigots will continue to benefit from pumped storage as a high-quality peak shaving power source. It is an essential flexible power source for new types of electricity. According to statistics from the Pumped Storage Industry Branch, the approved installed capacity of pumped storage in the country reached 68.89 GW in 2022, an increase of nearly 400% over 2021. As one of the oligopolistic enterprises in water turbine equipment, the company is expected to take the lead in benefiting and at the same time guarantee its performance growth.
Risk warning: Economic recovery falls short of expectations; power investment and construction falls short of expectations; order delivery falls short of expectations.