3Q23 performance is lower than we expected.
The company announced 1-3Q23 results: revenue 3.939 billion yuan, year-on-year-15.0%; return to the mother net profit 342 million yuan, year-on-year-18.3% TAC 3Q23 income 1.114 billion yuan, year-on-year-34.0%; return to the mother net profit 93 million yuan, year-on-year-50.7%. 3Q23 revenue dropped a lot compared with the same period last year, which we believe is mainly affected by the lag in the progress of digital bidding in the first half of the year, and the performance is lower than we expected.
Trend of development
In the first half of the year, the progress of digital bidding of the national network lags behind and affects revenue recognition, which is expected to accelerate in the fourth quarter. In the first half of the year, the progress of national network digital bidding lagged behind, and the first / second batch of digital bidding announced the winning of the bid in October, respectively, which did not generate more effective revenue in the first three quarters, resulting in phased pressure on the company's revenue. Judging from the bidding situation of the first two batches, the total bidding amount for digital equipment / services has reached 1.117 billion yuan, accounting for 83.1% of the whole year of 2022, accounting for 26.7% of the total. The company has won a total of 273 million yuan in the bid, and we think it is expected to accelerate the recognition of revenue in the fourth quarter. In addition, the third batch of digital bidding is under way, and we believe that some of the performance is still expected to be contributed by the end of the year. In terms of "Marketing 2.0", by October 2023, on the basis of the "baseline +" version launched in six provinces in the first half of the year, the company has launched the "baseline +" version of the national network Anhui, as well as the official launch of Ningxia, Hebei, Chongqing, Jiangxi and Hebei.
The off-grid virtual power plant business continues to advance, and the energy aggregation management platform is expected to benefit from the demand-side policy. In terms of virtual power plants, Jiyuan Software, a subsidiary, promotes the intelligent regulation and control platform of the Langxi "Virtual Power Plant" project in the Jiangsu-Anhui Cooperation demonstration Zone. By 2024, it will be able to achieve 100 MW distributed photovoltaic, 120 adjustable load enterprises and load data, and 30 distributed energy storage power stations, with a total regulation capacity of 100 MW. The company has been engaged in the digital power grid business for many years, and we believe that it is expected to fully benefit from the improvement of the prosperity of the virtual power plant. In terms of demand-side response, the energy aggregation management platform jointly developed by CLP Feihua and Torch Xinyuan has been officially launched, providing a variety of services such as demand-side response, microgrid management and equipment maintenance resource sharing. We believe that the landing of the "Power demand side Management method" is expected to bring increment to the construction of the demand side response platform, and the application of the company's energy aggregation management platform is expected to accelerate the expansion.
The gross profit margin of 3Q23 increased significantly, and the increase in fees dragged down the company's net profit margin. 1) Gross profit margin: the company's 3Q23 achieved a gross profit margin of 25.2%, year-on-year + 5.1ppt, the highest after 19 years of restructuring. 2) cost side: 3Q23 company sales / management / R & D expense rate + 0.8/3.9/4.0ppt to 3.1% Universe 7.6% Universe 7.2%. 3) net interest rate: 1-3Q23 Company achieves a net return rate of 8.69%, year-on-year-0.3pptjue 3Q23 net interest rate 8.32%, year-on-year-2.8ppt.
Profit forecast and valuation
Affected by the progress of the digital bidding of the national network, we have reduced the net profit of 2023 Universe by 6.3% of net profit in 2024 to RMB 1.062 million in 2001. The current share price corresponds to the price-to-earnings ratio of 18.5 / 15.7 in 2024. Maintain the outperform industry rating, and accordingly lower the target price by 6.7% to 19.6 yuan, corresponding to the 2023 Universe 22.2 times 2024 earnings, which has 41.4% upside compared to the current stock price.
Risk
The digital bidding of power grid is not as expected, and the single major customer is too concentrated.