Matters:
The company released its 2023 annual report. In 23, the company achieved revenue of 1,493 billion yuan, +22.12% year on year, realized net profit of 173 million yuan, +198.57% year over year, and realized net profit of 156 million yuan without return to mother, +266.79% year on year.
Commentary:
Performance has been significantly restored, profitability has improved, and the financial situation is stable. The external environment improved in 23 years, and the company's revenue and profit levels were significantly restored. The annual comprehensive gross profit margin was 34.44%, up 3.15 pcts year on year, and the period expense ratio was 18.27%, down 1.74 pcts year on year; operating cash flow was flowing in at 253 million yuan, up 11.2% year on year, balance ratio was 30.23%, down 5.15 pcts year on year, and book capital was 783 million yuan.
The combined appliance business contributed mainly to growth in 23 years, and 500kv combined appliances achieved a major breakthrough. In '23, the company's main subsidiaries Changgao High Voltage Switch (disconnector), Changgao Electric (combined electrical appliances), Changgao Senyuan (complete equipment), and Changgao Complete (complete equipment) achieved revenue of 3.53/7.25/2.08/ 178 million yuan respectively, respectively. The company's combined electrical appliance business contributed a major increase. At the same time, Changgao Electric achieved a net profit margin of 17.2%, an increase of 9.17pcts year-on-year, and a record high profit level. The company won the bid for 500kv for the first time in '23 (3.72 million yuan), and the combined electrical products won 53.265 million yuan in the first equipment tender for the State Grid 24 power transmission and transformation project, achieving a major breakthrough, which is expected to bring new increases this year.
The risk of impairment was further released in '23. In '23, the company accrued asset impairment losses of 44 million yuan and credit impairment losses of 0.12 million yuan, of which asset impairment losses mainly included goodwill reduction provisions of 259.54 million yuan calculated for the subsidiary (Hubei Huawang Electric Power Engineering Co., Ltd.). After this calculation, the goodwill book value of the subsidiary (Hubei Huawang Project) was 0, and there is no risk of further impairment; in addition, the company accrued an impairment provision of 163.96 million yuan for the Chunhua wind power project contract assets. After 22 After 23 years of calculation, there is only 42.726 million yuan left. If it is calculated according to account age in the future, it will have little impact on the company's overall performance.
Investment suggestions: Changgao Electric has been deeply involved in electrical equipment for more than 20 years, and its share of isolation switches is stable and high. The competitiveness of other primary and secondary equipment products continues to improve, and market channels are gradually being broadened. Currently, the company's financial impairment risks may have been gradually cleared, and the future growth path is clear. The company's net profit for 24-26 is estimated to be 3.1/38/460 million yuan, corresponding to EPS of 0.50/0.61/0.73 yuan, maintaining a target price of 9.5 yuan, and maintaining a “strong” rating.
Risk warning: Power grid bidding or construction falls short of expectations; marketing of the company's new products falls short of expectations; rising raw material prices weaken the company's profits.