Key points of investment
Build EPCOS one-stop electric energy service and expand Jiangsu to the whole country
The company has been deeply involved in the power industry for more than ten years and has developed into a scarce EPCOS one-stop power supplier in the industry. In 2020-2022, the company achieved operating income of 13.69 billion yuan, 18.56 billion yuan, and a 3-year CAGR of 33.51% in 2019-2022; in 2020-2022, net profit of 2.37, 3.01, and 256 million yuan, respectively, and 26.25% for the three years of 2019-2022. In the first three quarters of 2023, the company achieved revenue of 1,872 billion yuan, an increase of 24.62% year on year; net profit to mother was 203 million yuan, down 0.92% year on year.
Traditional business: Regional expansion goes hand in hand with industrial chain extension. The basic economy stabilizes and increases the qualifications obtained by the company. Using power consulting and design as the lead, it fully extends upstream and downstream of the industrial chain, and has established a one-stop power supply brand service model covering power consulting and design, power engineering construction, power equipment supply and intelligent electricity service business. The company is deeply involved in the Jiangsu regional market, while continuously developing markets outside the province. It has covered many provinces and cities such as Shanghai, Anhui, Zhejiang, and Shandong. Along with the cross-regional development of customers, the company's cross-regional development process progressed again, and the proportion of business revenue outside the province reached 30.46% in the first half of 2023. The intelligent construction of domestic power terminals is advancing at an accelerated pace, and the company launched the Electric Knight Cloud Platform to lay out intelligent electricity services. By the end of 2022, the Electric Man Cloud platform had connected 4,300+ enterprises and 80,000+ devices.
Accelerate the layout of the optical storage and charging business, and strengthen the advantages of traditional business collaboration in the field of photovoltaics. Relying on rich industrial and commercial customer resources, the distributed photovoltaic business has collaborated and achieved breakthroughs with the main business, and has signed multiple orders. In the field of energy storage, the company's energy storage series products cover a full range of products. Currently, it has participated in the construction of several major storage and industrial and commercial energy storage projects, and orders are progressing rapidly. The company plans to raise additional capital to lay out energy storage equipment, and at the same time promote the national layout of the business through strategic cooperation with Ruipu Lanjun and other battery cell factories. In the field of charging piles, based on housing distribution projects and residential areas, the company made this one of the key points of this charging pile network design. The company has differentiated its entry into the scenic bus and park forklift charging pile markets, and the charging pile business is expected to continue to expand. The company launched the Electric Knight Light Charging Service Station and is actively developing an integrated optical storage and charging business. As of October 26, 2023, the company has already commissioned two optical storage and charging stations.
Profit forecasting and valuation
First coverage, giving a “buy” rating. The company is a leading EPCOS one-stop power service provider, benefiting from the demand brought about by increased investment in power grids, upgrading distribution networks and new energy construction. We expect the company's net profit to be 2.84, 3.66, and 510 million yuan respectively in 2023-2025, corresponding EPS of 1.37, 1.77, and 2.46 yuan/share, respectively, and the corresponding PE is 24, 19, and 13 times, respectively. Comparable companies averaged 26x PE in 2024.
Taking into account the company's performance growth and a certain margin of safety, we gave the company an average PE of 26 times the industry in 2024, corresponding to a target market value of 9.4 billion yuan. The current market value has room to rise by 38.53%, giving it a “buy” rating.
Risk warning
Grid investment falls short of expectations, business expansion outside the province falls short of expectations, the risk of increased market competition, and the risk that payments fall short of expectations.