Incidents:
On March 20, 2024, the company announced its 2023 annual report, achieving operating income of 5.751 billion yuan, up 13.24% year on year; net profit to mother of 627 million yuan, up 15.46% year on year; net profit after deducting non-return to mother of 623 million yuan, up 17.77% year on year. In Q4 2023, we achieved revenue of 1,514 billion yuan, an increase of 2.39% year on year, and realized net profit to mother of 106 million yuan, an increase of 1.05% year on year.
Comment:
All aspects of the new power system continue to advance, driving steady growth in the company's performance. The company's business includes all aspects of the “generation, transmission, distribution and storage” of the new power system. In '23, the business division was redivided into three major blocks: power grids, power plants, and others (including electricity use, energy storage, etc.). Looking at the power grid automation business, the completed amount of grid infrastructure investment in 2023 was 5275 billion yuan, an increase of 5.2% over the previous year. The company has been deeply involved in the power grid industry for many years, leading the technology industry. The company's 2023 grid automation business revenue was 2,924 billion yuan (YOY +11.01%). In terms of the new energy business, the new capacity of the wind power and photovoltaic industry in 2023 was 76 GW (YOY +101%) and 217 GW (YOY +148%), respectively. The rapid growth of installed wind power has driven the rapid growth of the company's primary and secondary equipment and power electronics (SVG) products on the new energy side. Using its leading platform-based technology, the company won bids for a number of representative centralized and distributed renewable energy secondary equipment. In addition, the company's industrial control products such as PLC/DCS are used in batches, including hydrogen electrolyzer control, wind farm PLC, etc. The company's 2023 power plant automation business revenue was 2,491 billion yuan (YOY +11.55%), and gross margin was 27.54% (+2.77pct). Other revenue (including electricity usage/energy storage, etc.) was $322 million (YOY +61.87%).
The company continues to develop overseas business and is steadily advancing internationalization. The company's overseas business revenue was 160 million (YOY +10.6%). It won the bid for the Tabela hydropower project in Pakistan, and fully delivered the ADMS project in Nairobi, Kenya. The company actively promotes international development strategies, continues to take root in overseas markets such as Southeast Asia and Africa, strengthens overseas localization strategies, and enhances the localization market and service capabilities of international business. In terms of products, in addition to secondary systems, we will strengthen overseas market expansion for products such as power electronics, primary and secondary integration, and energy storage.
The company operates lean, and the profits of various businesses have steadily increased. Overall, the company's gross margin was 34.44% (YOY+2.29pct). By business, the gross margin of the company's power grid automation business was 41.89 (YOY+1.98pct), the gross margin of the power plant automation business was 27.54% (YOY+2.77pct), and the gross margin of electricity consumption and energy storage was 18.93% (YOY+7.93pct).
By region, the gross margin for domestic business is 34.33% (YOY+2.16pct), and the gross margin for international business is 35.77% (YOY+5.97pct).
The company lays out forward-looking fields such as hydrogen energy/flexibility/energy storage to increase the development and application of cutting-edge technology. In terms of hydrogen energy, the company won the bid for the Cixi Hydroelectric Coupling DC Microgrid Demonstration Project and participated in the national key research and development plan - the key technology of the compact renewable energy electric hydrogen cogeneration system module. In the field of flexible direct transmission and distribution, the company won bids for various major compact flexible interconnection technology projects such as the Zhuhai Power Supply Bureau and the Foshan Power Supply Bureau, as well as the flexible interconnection system in the low-voltage platform area of the State Grid Shanghai Research Institute. In terms of energy storage, the company relied on the advantages of power electronics platforms to thoroughly study network control technology and comprehensively lay out various energy storage converter technology routes; high-safety liquid-cooled energy storage PACs, battery compartments, and intelligent industrial and commercial integrated cabinets completed new product development. The company focuses on R&D. The R&D cost rate in 2023 remains high at 9.41%. The direction includes new applications of new products such as hydrogen energy/flexibility/energy storage, as well as innovation in the fields of industrial Internet platforms, artificial intelligence, and information security.
Profit forecast and investment rating: We expect the company's 2024-2026 revenue to be 66.7, 80.85, and 9.540 billion yuan, respectively, up 16%, 21.2%, and 18% year-on-year; net profit to mother will be 748, 8.92, and 1,008 million yuan, respectively, up 19.2%, 19.3% and 13.0% year-on-year, maintaining a “buy” rating.
Risk factors: Grid investment falls short of expectations, fluctuating raw material prices, grid construction progress falls short of expectations, and increased market competition.