Core views
The company released its three-quarter report for 2023, with a steady increase of 17.7% in performance. Gross sales margin reached 36.3%, a year-on-year increase of 1.99pct, mainly due to changes in product structure, impressive growth rates for high-margin products, and cost reduction and efficiency. Net cash flow from operating activities increased by $203 million, and cash repayments from the main business improved. In 2023, the high number of power grid tenders led the company's in-network secondary business to maintain steady growth; the high installed volume of wind power and photovoltaics drove the start of the company's new energy business, increasing its share of revenue. Against the backdrop of rising new energy installations and a boom in grid tenders, the company will continue to benefit from the industry's strong demand.
occurrences
The company released its three-quarter report for 2023, achieving operating income of 4.237 billion yuan, an increase of 17.71% over the previous year; net profit of 521 million yuan, an increase of 18.90% over the previous year; and net profit of 518 million yuan after deducting non-return net profit of 518 million yuan, an increase of 21.82% over the previous year. Among them, revenue for the third quarter was 1,367 million yuan, up 13.07% year on year; net profit was 166 million yuan, up 23.38% year on year; net profit after deducting non-return mother was 163 million yuan, up 23.04% year on year.
Brief review
2023Q3 performance maintained steady growth
Revenue for the third quarter of 2023 reached 1,367 billion yuan, up 13.07% year on year and down 19.21% month on month. Net profit/net profit after deducting non-return net profit was $166/163 million respectively, up 23.38%/23.04% year on year and down 22.07%/22.38% month on month. On the performance side, the overall trend of steady upward development was maintained in the third quarter of 2023.
Gross margin continued to recover, cash flow was good, and R&D investment continued to grow 1) Gross margin recovery: The gross margin for the first three quarters of 2023 reached 36.29%, up 1.99pct year on year; Q3 gross profit margin was 36.69%, up 2.97pct year on year and 1.32pct month on month. It is mainly due to changes in product structure. The growth rate of high-margin products is impressive, boosting the overall gross profit margin; and the continuous progress of cost reduction and efficiency efforts.
2) Good cash flow: The company's net cash flow from operating activities in the first three quarters of 2023 was 381 million yuan, an increase of 203 million yuan over the previous year, mainly due to the company's strengthened contract repayment management and increased customer repayment.
3) R&D investment continues to grow: R&D expenses were 378 million yuan, an increase of 22.12% over the previous year. The R&D expenditure rate was 8.9%, an increase of 0.3 pct over the previous year. The company has always maintained a high level of R&D investment, consolidated technological leadership, and expanded new business and new products.
The power grid is growing steadily, focusing on developing the new energy market, and the international market continues to break through 1) Continued deep cultivation of the power grid. The secondary equipment market share has steadily ranked second, and the company has fully benefited from industry growth. In the centralized bidding for the State Grid transmission and transformation project, the first four batches of relay protection business totaled about 3.94 billion yuan, an increase of 41.6% over the previous year. The company's total bid amount reached 559 million yuan, accounting for 14%, ranking second.
2) The increase in the installed volume of new energy drives the company's business volume. In September 2023, the cumulative installed capacity of photovoltaics reached 512 million kilowatts, a cumulative year-on-year increase of 45.3%, and the cumulative installed capacity of wind power was 400 million kilowatts, a cumulative year-on-year increase of 15.1%. The installed capacity of new energy continues to increase, and the company's power generation side business will continue to benefit.
3) Continued breakthroughs in the international market. In the first three quarters, the company signed a 500kV substation project in Naushela, Pakistan to further expand overseas ultra-high voltage grade projects; signed a 2*40MVar dynamic reactive power compensation project for India's Koppal photovoltaic power plant. SVG products entered the Indian market for the first time; and signed the Philippine NGCP 554 VI Northern Luzon substation upgrade project to further expand the market share of the company's products in the main network in the Philippines.
Performance forecasts
The company's net profit for 2023 and 2024 is estimated to be 66/8.2 billion yuan, PE 17.3/14.0x.
Risk analysis
1) On the demand side: Changes in national infrastructure policies have caused the scale of power supply investment to fall short of expectations; the scale of power grid investment fell short of expectations; demand for power equipment fell short of expectations due to the decline in the installed growth rate of new energy installations; the growth rate of electricity consumption by the whole society declined, etc.; the bidding progress for the two networks fell short of expectations; the progress of UHV construction fell short of expectations, etc.
2) On the supply side: Prices of commodities such as copper resources and steel have risen; the supply of power electronic devices is tight, and the progress of localization has fallen short of expectations.
3) Policy aspects: Support related to the new electricity market fell short of expectations; the progress of the electricity price mechanism was lower than expected; the progress of the electricity spot market fell short of expectations; the price difference between peak and valley of electricity fell short of expectations, etc.
4) In terms of the international situation: the energy crisis is easing relatively quickly, energy prices are falling rapidly; international trade barriers are deepening, etc.
5) Market side: The competitive landscape has changed drastically; increased competition has caused the profitability of all aspects of power equipment to fall short of expectations; transportation and other expenses have risen;
6) Technical aspects: The progress of technical cost reduction is lower than expected; technical reliability is difficult to further improve, etc.