Core views:
Leading private secondary equipment, steady business growth. The company was founded in 1994 and initially focused on relay protection products. After 30 years of development, the products have covered all aspects of power system source network load storage. Since 2020, the company has actively expanded new products within the network+new energy business outside the network, continued to improve management, and achieved rapid growth in revenue and performance. With 2023Q1-Q3, the company achieved revenue of 4.237 billion yuan, +17.71% year-on-year; net profit to mother was 522 million yuan, +18.90% year-on-year.
Online business: Continued insurance products are ready to be launched, and the field of digital intelligence is actively expanding. Short-term: In newly built lines, the tender for secondary equipment lags behind the first equipment. Demand for primary equipment from the State Grid increased dramatically in 2023, which is expected to drive the expansion of demand for secondary equipment such as secondary insurance in 2024. The company's market share in 2023 was 15.2%, which is low compared to previous years, and the market share is expected to pick up in 2024. Mid-term: The State Grid 24-year work conference proposed the construction of a strong digital intelligent power grid. The company's new products expand the digital intelligence of anchored power grids. It has already been introduced through centralized control station products to speed up the development of equipment such as intelligent inspection and primary and secondary integration of distribution networks, and is expected to enjoy the dividends of digital grid intelligence. Long-term: The penetration rate of new energy sources is increasing, power systems are becoming more electronic, and the fault response process shows nonlinear characteristics, leading to challenges to traditional relay protection performance based on the theory of synchronous motor power supplies. A major cycle of renewal and upgrading can be expected.
Off-grid business: There are many highlights on the power generation side and steady expansion on the storage side. Traditional power generation: Demand in the thermal and hydroelectric power market continues to grow. As of November 2023, the total scale of pumped energy storage projects already under construction (approved) in China exceeds 200 million kilowatts, which is expected to contribute to order growth in the future. New energy power generation: In 2023, China's new photovoltaic and wind power installations will reach 210 GW and 44 GW, driving demand for secondary equipment and SVG. Energy storage: The company innovates energy storage technology and develops leading grid-based energy storage. Electricity consumption:
The products are widely used in downstream fields such as petrochemicals and iron and steel metallurgy.
Profit forecast and investment advice: Net profit due to mother for 23-25 is expected to be 629/7.30/848 million yuan, +15.7%/16.1%/16.2% year-on-year. Referring to comparable companies, net profit of 20.0x PE for 24 years was given, with a reasonable value of 17.55 yuan/share. Referring to the cash dividend ratio for the past two years, assuming that it remained at 90% in 23, the current dividend rate is about 5%. First coverage, giving a “buy” rating.
Risk warning: grid investment falls short of expectations; new business development falls short of expectations, etc.