Incident: The company released its 2023 annual report. In 2023, it achieved 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 was 623 million yuan, up 17.77% year on year, and plans to distribute a cash dividend of 0.6 yuan (tax included) per share to all shareholders. The 2023Q4 company achieved operating income of 1,514 billion yuan, an increase of 2.39% year on year, and realized net profit of 106 million yuan, an increase of 1.05% year on year and a decrease of 36.35% month on month.
The main business revenue is growing steadily, and profitability is rising steadily
Power grid automation business: The company continues to be deeply involved in power grids, developing markets through product differentiation and further improving service quality. Lean operating efficiency is gradually showing, and has a good brand influence in power grid customers. In 2023, the business achieved operating revenue of 2,924 billion yuan, an increase of 11.01% year on year, and gross margin increased 1.98 pcts year on year to 41.89%. Power plant and industrial automation business: The company closely follows the industry development cycle, focuses on developing the new energy market, continuously strengthening product innovation, and rapidly expanding the business scale. In 2023, the business achieved revenue of 2,491 billion yuan, an increase of 11.55% over the previous year, and gross margin increased 2.77 pcts year on year to 27.54%.
Continued breakthroughs have been made in the new energy, energy storage and hydrogen energy markets, helping the company develop in the long term.
1) In terms of new energy, the company continues to expand the market share of key customers, winning bids for China's first 10-million-kilowatt “Shagowang” integrated new energy base project — the Three Gorges Kubuqi Shagowang Project, the world's largest and highest altitude complementary water and light — Kola Phase I PV project at the two estuaries of the Yalong River. 2) 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 centralized, string and high voltage cascade 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. In addition, the company also won bids for a number of energy storage energy management system frameworks, maintaining a leading market share; it also won bids for new high-voltage cascaded energy storage directions, fire storage joint frequency modulation scenarios, and energy storage projects with new energy configurations. 3) In terms of hydrogen energy, the Cixi hydrogen-electric coupling DC microgrid demonstration project supporting the Guozhong Project completed off-grid operation tests and participated in the national key research and development plan -- the key technology of the compact renewable energy electric hydrogen cogeneration system module.
Maintain a “buy” rating. The company continues to cultivate deeply in the power grid field, but considering that new business fields such as energy storage and hydrogen energy still require a certain amount of time to grow, based on prudential principles, we lowered our 24/25 and introduced a 26-year profit forecast. The company's net profit for 24-26 is estimated to be 742/8.69/1.02 billion yuan (14% down/ 15% down/increase), respectively, corresponding to EPS of 0.89/1.04/1.20 yuan. The current stock price is 17/15/13 times PE in 24-26, respectively. The company has a deep technical accumulation in the field of safety automation. Energy storage and hydrogen production are the company's key sectors in the future, and are expected to gain a certain market share. Overall, the company's various businesses have a high level of prosperity and maintain a “buy” rating.
Risk warning: Risk of fluctuations in raw material prices, risk of market competition, risk of power engineering investment falling short of expectations.