The company is the core enterprise of the CLP Group, leading domestic primary equipment manufacturing capability, and a supplier of UHV core equipment. The company's core business is the manufacture, development and testing of high voltage, ultra-high voltage and UHV AC/DC transmission and distribution equipment. The main products include high voltage switches, transformers, reactors, power capacitors, transformers, insulators, converter valves, etc. The company has been deeply involved in the industry for many years, continuously enhanced its R&D capabilities, covered the entire transmission and distribution equipment industry chain, and actively expanded the international and domestic markets, forming a strong advantage.

The company continues to upgrade its industry, and its performance is increasing steadily. 2023Q1-Q3 achieved revenue of 13.821 billion yuan, +3.49% year over year, and realized net profit of 521 million yuan, or +10.88% year over year. Q3 achieved revenue of 4.475 billion yuan, -3.97% YoY and -2.99% month-on-month; net profit to mother was 099 million yuan, +4.01% YoY and -57.8% YoY. In terms of profitability, 2023Q1-Q3 gross margin and net margin were 16.75%/4.59%, respectively, +0.67pct/+0.55pct; Q3 gross margin and net margin were 17.23%/3.38%, respectively, +2.12pct/+0.81pct, and -0.49pct/-2.55pct month-on-month. 2023Q1-Q3 net operating cash flow - 1,086 billion yuan, +26.20%. China's UHV construction reached its peak. The company's bid amount increased dramatically, and its market share increased. In 2023, a total of 4 DC UHV projects (Longdong-Shandong, Jinshang-Hubei, Ningxia-Hunan, and Hami-Chongqing) were approved for commencement, reaching the highest value in history; it is expected that 4 DC UHV approvals will be started in 24, continuing the boom. Among them, projects such as Mengxi-Beijing-Tianjin-Hebei and Gansu-Zhejiang are expected to use flexible straightening technology, driving a significant increase in the value of converter valves. The company won a total bid amount of about 7.9 billion yuan for UHV equipment in 2023, achieving significant growth; the company's UHV equipment market share reached about 20% in 23, ranking first in the industry, and its share has increased compared to previous years. We expect the company's 23/24 UHV orders to contribute significantly to the company's 24/25 results.

Investment advice: The company's net profit for 2023-2025 is expected to be 709/10.08/1.310 billion yuan, respectively, or +15.82%/+42.06%/+30.04% year-on-year, corresponding PE of 38.1/26.8/20.6. The company is the core enterprise of the CLP Group and the core supplier of UHV equipment. It achieved an increase in bid volume and share in UHV and main network equipment tenders in '23. It covered for the first time, and gave it an “increase in weight” rating.

Risk warning: Power grid investment falls short of expectations; UHV construction falls short of expectations, risk of declining market share.