Investment logic: In 2024, the tender batch for State Grid smart meters increased to 3 batches. The first batch of tenders was brought forward to February (the previous value was April 29, 2024), and the first batch of tenders also increased by 86% to 46.53 million units. The company's smart meters accounted for 80% + of revenue in 2022, which is expected to fully benefit from the industry's growth dividends.
The company is a leading smart meter enterprise in China (top 10 in bid share) and has deep technical strength. Mr. Ding Minhua, the chairman of the company, is a top talent in electricity meter technology in the country. The company started as an ODM business and later switched to its own brand. In 2014, the company was successfully listed on the Shenzhen Stock Exchange GEM. From 2015-2016, it successively acquired companies such as Juyuan Intelligence and Nayu Electric to expand electricity meters into the water meter and gas meter business, and established Zhejiang Juneng Electricity Sales Company to lay out user-side energy management.
Investment logic 1: The total number of domestic smart meters and terminals tenders was 46.53 million (yoy +86%), and the company's share may rise. The State Grid issued a tender notice for the first batch of smart meters in 2024. The number of tenders in the first batch increased by 86% to 46.53 million units. The number and amount of tenders is expected to increase year-on-year for the whole of 2024. In recent years, the share of new energy sources has increased rapidly, and catalytic terminals are expected to measure electricity meters with high accuracy. In 2024, the share of State Grid smart meters is expected to continue to be averaged by leading companies, and the company's share may pick up. In the first and second batches of the 2023 State Grid smart meter tender, the company's share of the amount was about 3.82%/2.51%. Previously, the company's share was 3%-5%. Juhua Technology's share is expected to pick up in the 2024 electricity meter tender.
Investment logic 2: Smart meters going overseas is a major trend, and the company's overseas meter business may accelerate growth. Electricity meters going overseas is a long-term trend. The penetration rate of smart meters in Europe and the US is high, and demand is mainly based on renewal and replacement; the penetration rate of smart meters in Asia, Africa, and Latin America is low (6.2% penetration rate in Latin America in 2022). In recent years, power grid development policies have been issued one after another, and electricity meters are expected to grow rapidly. The company relies on its European subsidiary LOGAREX to actively expand the European market, and is the main supplier and strategic partner of several major power companies such as German EON. The company continues to increase investment in overseas markets, and has now expanded its business to Africa, Central Asia, South America, Southeast Asia, Pakistan, etc. The company's board of directors is considering setting up overseas manufacturing sites in the future.
Investment logic 3: Charging facilities in Europe and the US are lagging behind, and the prospects for Chinese charging pile companies to go overseas are broad under policy impetus. There is a clear gap in charging pile support in Europe and the US, and the ratio of car piles remains high. Supporting facilities for charging piles in the US are lagging behind, and the ratio of car piles in 2021 is over 18.0. Current policies are driving countries to build charging infrastructure at an accelerated pace, and overseas demand is expected to increase significantly. We expect the Europe/US charging pile market to reach 230/145 billion yuan in 2025, with a CAGR of 48%/80% in 2021-2025. At present, Juhua Technology's US charging pile TOB operation pile has been successfully co-ordinated for credit card payments. At the same time, US highway DC pile technical preparations have been completed, and it is expected that certification work can begin after the US procurement information is clarified.
Profit forecast and investment advice: The company is expected to achieve net profit of 583/7.90/909 million yuan in 2023-2025, an increase of 23.5%/35.5%/15.1% over the same period. The company's PE valuation in 2023-2025 was 15.1/11.1/9.7 times, covered for the first time, and gave a “buy” rating.
Risk warning: Domestic and foreign meter tenders fall short of expectations, charging pile delivery falls short of expectations, forecast deviations and valuation risks