Event: October 30, 2023, the company released its report for the third quarter of 2023. In the first three quarters of 2023, the company achieved operating income of 4.237 billion yuan, an increase of 17.71% over the previous year; realized net profit of 521 million yuan, an increase of 18.90% over the previous year; and realized net profit of 518 million yuan, an increase of 21.82% over the previous year. In 23Q3, the company achieved operating income of 1,367 million yuan, an increase of 13.07% over the previous year; realized net profit of 166 million yuan, an increase of 23.38% over the previous year; and achieved net profit of 163 million yuan, an increase of 23.04% over the previous year.
Profitability continues to improve, and expenses are well controlled. In terms of profitability, the gross margin for the first three quarters of 2023 was 36.29%, up 1.99Pcts year on year, net profit margin was 12.33%, up 0.13Pct year on year; 23Q3 gross margin was 36.69 percent, up 2.97 Pcts year on year, net profit margin was 12.18%, up 0.99Pct year on year.
In terms of cost control, the company's fee rate for the first three quarters of 2023 was 20.50%, an increase of 0.10Pct over the previous year. Among them, the management/sales expense ratio was 4.52%/8.01%, respectively, and -0.04/-0.35pct year-on-year, respectively.
The equity incentive plan was released, demonstrating the company's confidence in development. On October 17, the company announced the first grant of restricted shares to incentive recipients of the Sailing 2 Incentive Plan. The number of shares granted for the first time was 19.174 million shares, accounting for about 2.52% of the company's total share capital on the date of the announcement of this incentive plan, and the initial grant price was 7.59 yuan/share. Incentives were granted for the first time to a total of 462 people, including company directors, senior management, and core technical (business) backbone. First exercise target granted: (1) 2023: based on the average value of net profit in 2021 and 2022, the net profit growth rate in 2023 is not less than 25%; (2) 2024: the average net profit growth rate for 2021 and 2022 is not less than 65%; (3) 2025: the cumulative growth rate of net profit in 2023 and 2024 is not less than 65%; (3) 2025: the cumulative net profit growth rate in 2023, 2024, and 2025 is not less than 110%;
A leading enterprise in power automation, its business covers the “transmission, distribution and storage” process. The company is a comprehensive solution provider focusing on the fields of new energy and power generation, smart grids, new distribution networks, smart electricity use, and energy storage.
The project continues to achieve breakthroughs. According to the disclosure, the company won the bid for the State Grid's first 500kV secondary optimization demonstration project - Shandong Pioneer Transformation, using fully autonomous controllable software and hardware to help build a new generation of autonomous and controllable high-reliability substations.
International projects continue to win bids. The company continues to receive orders in overseas markets: 1) signed a 500kV substation project in Naushela, Pakistan, and the overseas ultra-high voltage grade project market was further expanded; 2) 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; 3) signed the Philippine NGCP 554 VI Northern Luzon substation upgrade project to further expand the market share of the company's products in the Philippine main network.
Investment suggestions: The company benefits from the construction of new power systems, and the rapid growth of the new energy business. We expect the company's revenue in 2023-2025 to be 62.05, 75.52, and 9.281 billion yuan, respectively, with corresponding growth rates of 22.2%, 21.7%, and 22.9%; net profit is 6.72, 7.95, and 955 billion yuan respectively, with corresponding growth rates of 23.6%, 18.4%, and 20.2% respectively. Using the closing price of October 31 as the benchmark, the corresponding PE for 2023-2025 is 17X, 14X, 12X Maintain a “Recommended” rating.
Risk warning: risk of policy changes; risk of fluctuations in raw material prices.