INTRODUCTION
As a leader in the power equipment industry, Guodian Nanrui surpasses other companies in the industry in terms of revenue, profit scale, and market capitalization. Earlier, we released an in-depth “From Grid Investment to Looking at South Rui's Growth Trends”, which detailed the company's competitiveness, market position, and growth drivers. At present, as the construction of the new power system progresses, we believe that the certainty of Guodian Nanrui's growth is increasing in the short term and medium to long term. Therefore, in this report, we will once again discuss the company's growth momentum and potential in detail.
Short-term: All businesses are expected to go hand in hand this year, and growth is certain
In the short term, we believe that the company's main growth center is the current business trend. Currently, Guodian Nanrui has four major businesses: power grid automation and industrial control, relay protection and flexible transmission, power automation and information communication, power generation, and water conservancy and environmental protection, all of which have strong order support, and are expected to usher in growth in 2024. 1) Power grid automation: including substation automation, power distribution automation, scheduling and stable control, etc. Among them, products such as intelligent substations, intelligent distribution networks, and smart meters were collected and tendered by the State Grid, which laid the foundation for the company's growth in 2023. At the same time, new products such as next-generation scheduling, power trading systems, new power load management systems, and next-generation centralized control systems have emerged along with the development of new energy sources. The urgency of demand is clear. Currently, it is in the promotion stage, and also has a high level of prosperity; 2) Flexible transmission: mainly including HVDC switching Flow valves, DC control protection, etc., companies The share is leading; the State Grid completed 4 DC tenders in 2023, close to the highest point in history; the company received impressive orders and is expected to be delivered in 2024; and the number of UHVDC tenders is expected to remain 4-5 in 2024, and flexible DC will also be implemented, which will support the company's order boom; 3) Power information communication: the total tenders for the State Grid digital equipment and services in 2023 were about 8.5 billion yuan, an increase of 5%-10%; and we believe that digitalization is essential for new power systems One direction is that the economy is sustainable; 4) Power generation and water conservancy and environmental protection: mainly involving unit control, protection and grid-connected solutions for various types of power supplies, etc., and will continue to benefit from the development of domestic wind power, photovoltaics, large-scale storage, and pumped water storage in 2024.
Medium to long term: Consumption of new energy sources has benefited, and new products and new market contributions have increased in the medium to long term. We believe that Guodian Nanrui's growth is still quite clear. On the one hand, the company's current business is closely related to the future direction of the power grid: the company is the core listing platform under Nanrui Group and the State Grid Electric Power Research Institute. It has obvious advantages in technology research and development capabilities and project resource acquisition capabilities, and can better adapt to the development trend of power grids; at present, improving new energy consumption capacity is one of the inevitable trends in power grids. The core is the improvement of grid regulation capacity, grid construction, and expansion of regulatory resources, respectively, corresponding to the company's grid automation and information communication, flexible transmission, power generation and water conservancy and environmental protection businesses, which means that the company's owners' enthusiasm is expected to continue. On the other hand, the company is actively promoting the development of new products and new markets, which is expected to bring significant increases: the demand for IGBT applications in power systems is expected to accelerate in the future. The company has been developing IGBT for many years. Previously, it has jointly invested with the Joint Research Institute under the State Grid to establish Nanrui Joint Research to enhance its technical strength. Currently, it has achieved independent R&D of 650V-4500V IGBT devices, and is expected to benefit from increased demand within the grid and outside the grid in the future; 2) Overseas power grid investment We believe that future growth will increase in the future, driven by energy transformation, intelligent manufacturing upgrades, and old reforms in Europe and the US. Switzerland entered the layout early and has now achieved business distribution in most overseas regions. The amount of overseas contracts in 2022 and overseas revenue in the first half of 2023 increased rapidly, and is expected to bring incremental contributions in the future.
Investment advice
We believe that the company is still one of the most certain companies with the most consistent growth in the power equipment industry. The company's net profit attributable to shareholders of the parent company in 2023 and 2024 is estimated to be about 7.4 billion yuan and 8.5 billion yuan, respectively, and the corresponding valuations are 27 and 23 times, respectively. Maintain a “buy” rating.
Risk warning
1. Grid investment falls short of expectations; 2. New products are progressing faster than expected; 3. Risk that profit forecasting assumptions are not true or fall short of expectations.