Incident: On January 17, 2024, State Grid Information and Communications released the 2023 Annual Performance Report. In 2023, the company achieved operating income of 8.039 billion yuan, an increase of 5.57% over the previous year; achieved net profit of 836 million yuan, an increase of 4.29% over the previous year; realized net profit without deduction of 787 million yuan, an increase of 1.41% over the previous year.
Comment:
The fourth quarter results showed an inflection point. The company achieved operating income of 4.10 billion yuan in 2023Q4, an increase of 37.54% over the previous year; realized net profit of 494 million yuan to mother, an increase of 28.99% over the previous year. The increase in performance in the fourth quarter increased significantly. On the one hand, the signing of most tender contracts in the first three quarters was delayed to Q4 compared to previous years. On the other hand, the Q4 results also verified that the negative effects of the State Grid tender delays gradually subsided.
The company's State Grid digital bid situation continues to improve. According to the bid announcement previously issued by the company, the State Grid ICT and its subsidiaries (including Jiyuan Software, CLP Pu Hua, CLP Feihua, and Qiming) won the bid amount of 687 million yuan in 2023. The main winning projects included implementation of the marketing 2.0 system, data center, etc. According to previous company announcements, in the third batch of digital service tenders in 2022, State Grid ICT won a total of 317 million yuan; in the second batch of digital service tenders in 2023, State Grid ICT won a total of 273 million yuan. State Grid ICT and its subsidiaries saw a sharp increase in the bid amount and number of projects won in the 2023 digital tender. We believe that the restrictive factors of the State Grid tender in 2024 will be lifted, and the company's performance is expected to rise to the next level.
The State Grid's 2024 investment target was announced, and the company is expected to continue to benefit. Recently, the State Grid revealed in a news interview that in 2024, the State Grid will continue to increase the construction of strong digital intelligent power grids, promote the green and low-carbon transformation of energy, and build a number of digital intelligent and strong power grid demonstration projects around application scenarios such as digital distribution grids, new energy storage regulation and control, and vehicle network interaction. The total investment in power grid construction is expected to exceed 500 billion yuan. This time, the power grid proposed the concept of “digitally intelligent and strong power grids” for the first time. This may mean that the importance of digitalization in the investment and construction of the State Grid will further increase. As a subsidiary responsible for managing the information technology business within the State Grid system, its business covers most digital information systems within the State Grid, such as the electricity marketing system, the integrated management system, and the three central platforms. We believe that the company will also continue to benefit from the structural inclination of the State Grid's digital investment.
Investment advice: Maintain a “buy” rating. From 2023 to 2025, the company is expected to achieve operating income of 80.39/93.05/10.607 billion yuan, an increase of 5.57%/15.75%/13.99%; net profit to mother of 8.36/10.00/1,176 billion yuan, an increase of 4.29%/19.66%/17.59% year-on-year.
Risk warning: Grid tenders and electricity informatization investments fall short of expectations.