Key points of investment
Event: The company publishes its 2023 annual report. The company achieved revenue of 5.751 billion yuan in 2023, +13.24% year over year; net profit to mother of 627 million yuan, +15.46% year over year; net profit after deducting non-return to mother of 623 million yuan, +17.77% year over year.
Comment:
The results were in line with expectations, and the cash flow was impressive. During the reporting period, the company achieved operating income of 5.751 billion yuan, +13.24% year on year; realized net profit attributable to shareholders of listed companies of 627 million yuan, +15.46% year over year. On a quarterly basis, 23Q4 achieved operating income of 1,514 billion yuan, +2.39% year-on-year, and realized net profit attributable to shareholders of listed companies of 106 million yuan, or +1.05% year-on-year. By business, power grid automation products achieved revenue of 2,924 billion yuan, +11.01% year-on-year, gross profit margin of 41.89%, and year-on-year +1.98pct, mainly benefiting from the promotion of new domestic power systems and dual-carbon policies; power plants and industrial automation products achieved revenue of 2,491 billion yuan, +11.55% year-on-year, gross profit margin of 27.54%, and +2.77pct year-on-year, mainly due to continuous breakthroughs in the new energy market. In addition, the company's operating cash flow in 2023 was 1,233 billion yuan, +73.63% year-on-year, and the performance was impressive. The company paid out a cash dividend of 499 million yuan, and the dividend ratio was impressive (3.78%).
Keeping up with demand for new power systems, overseas business is expected to contribute additional volume. As energy transformation accelerates and the construction of new power systems continues to advance, market opportunities are highlighted, and the wind power, photovoltaic and energy storage industries have ushered in a period of rapid development.
On February 6, 2024, the National Development and Reform Commission and the National Energy Administration issued the “Guiding Opinions on the High-Quality Development of Distribution Grids under the New Situation”, which aims to promote the high-quality development of distribution grids under the new situation. As a leading provider of new power system solutions, the company focuses on smart power generation and new energy, smart grids, smart distribution, smart electricity use, and new energy storage, and will continue to benefit from the construction of new power systems in China. From a regional perspective, the amount of international business delivery contracts has increased, and the overall gross margin has increased due to changes in the contract structure. In 2023, the company's international business achieved revenue of 160 million yuan, +10.60%, gross profit margin of 35.77%, and +5.97pct year over year. Driven by multiple factors such as global energy transformation, power grid upgrading and manufacturing expansion, the company has great potential to go overseas, and overseas business is expected to contribute new volume.
Focus on the cutting edge of technological innovation and continue to make breakthroughs in the field of forward-looking layout. During the reporting period, the company continued to focus on technological innovation and product competitiveness improvement, investing 541 million yuan in R&D expenses, +27.22% year-on-year, and investing 122 million yuan in capitalized R&D, +75.40% over the same period last year. In the field of new energy, the core competitiveness of SVG products continues to improve, winning the bid for annual framework bidding projects of large power generation groups such as Huaneng Group and CNNC Huineng Group; in the field of hydrogen energy, the Cixi hydroelectric coupling DC microgrid demonstration project supporting the national heavy duty project completed off-grid operation tests; continued to lead the flexible power transmission and distribution field, winning the bid for many major compact flexible interconnection technology projects such as the Zhuhai Power Supply Bureau and the Foshan Power Supply Bureau; in the field of energy storage, in-depth research on grid-based control technology and won the bid for liquid-cooled cascade battery energy storage equipment and systems of the Southern Grid Energy Storage Research Institute Integrated technology services, 2023-2025 The cascade battery energy storage system framework maintains a leading edge in the new high-voltage cascade energy storage direction.
Investment suggestion: The market share of the company's secondary equipment products is steadily increasing, focusing on developing the new energy market, and is expected to benefit from the advancement of new power system construction in the long term. The company's net profit for 2024-2026 is estimated to be 7.50, 8.65, and 1.10 billion yuan, respectively, corresponding to EPS of 0.90, 1.04, and 1.21 yuan/share, corresponding to PE18, 15, and 13 times, maintaining a “buy” rating.
Risk warning: 1. Grid investment falls short of expectations; 2. New product development falls short of expectations; 3. Industry competition intensifies.