Main points of investment

Industry competition intensifies, companies' profitability is under pressure

The company's revenue and profit scale declined in the first half of the year, mainly due to intensified competition in the industry, a decline in the price of the company's products, and a slight decrease in the installation and operation of distribution network equipment. The company's gross profit margin in the first half of this year was 44.58%, down 7.36 percentage points from the same period last year, and profitability was under pressure.

Strengthen iterative product development and lay out new products in advance

Under the background of new power system construction, with the increasing demand for intelligent distribution in power grid, the company complies with the industry trend and strengthens product iterative upgrade, including based on 5G communication version, based on quantum encryption version, based on Beidou communication version, based on power network communication version, 20kV version, metering intelligent on-pillar switch to meet the needs of more application scenarios. The company is also actively developing new products, including common box type environmentally friendly gas column switches, primary and secondary deep fusion intelligent ring network cabinets, etc., and a number of new products have obtained third-party inspection reports.

The company also actively develops other new technology reserves, including high-precision electronic sensors of different materials, external capacitance power extraction devices with different structures, core common components and algorithms of the software platform, etc.

Actively carry out marketing activities to promote new customers

Over the years, the company has been recognized by the provincial power company by relying on excellent products and solutions, which has laid a solid foundation for improving product penetration. In the first half of this year, orders were fulfilled in Zhejiang, Jiangsu, Fujian, Shanxi, Hunan, Hubei, Sichuan, Heilongjiang and other provinces. In the expansion of new market areas, the company's sales teams actively carry out market publicity, pilot, bidding and other activities to promote the company's brand and increase customer impressions, so as to win more new users. at the same time, actively participate in the bidding qualification verification activities of State Grid and Southern Power Grid.

Profit forecast and valuation

Downgrade earnings forecast and maintain "buy" rating. The company is the leading enterprise of intelligent on-post switch in domestic distribution network, which benefits from the acceleration of intelligent construction of distribution network. Taking into account the lower-than-expected demand of the company and the uncertainty of the pace of business development, out of caution, the profit forecast is lowered, and the company's net profit is expected to be 2.32,2.78 and 327 million yuan from 2023 to 2025 (3.18,3.78 and 449 million yuan respectively before the reduction). The corresponding EPS is 1.66,1.99,2.34 yuan respectively, and the corresponding PE is 19,16,13 times respectively. Maintain a "buy" rating.

Risk hint

Sales are concentrated in the State Grid, high regional concentration of business, single product structure, and so on.