Investment events
1) In 2023, the company achieved total revenue of 15.293 billion yuan, up 15.83% year on year; net profit to mother of 523 million yuan, up 41.06% year on year; net profit after deducting non-return to mother of 489 million yuan, up 46.47% year on year; gross profit margin of 11.29%, down 0.25 percentage points year on year; net profit margin to mother of 3.42%, up 0.61 percentage points year on year. In '23, the company plans to distribute 300 million yuan in cash, with a dividend payment ratio of about 57.38%. The dividend rate corresponding to the closing price on March 28 is 4.35%.
2) In the fourth quarter of 2023, the company's revenue was 4.309 billion yuan, up 19.66% year on year, up 2.93% month on month, net profit to mother was 164 million yuan, up 54.05% year on year; net profit after deducting non-return to mother was 149 million yuan, up 70.28% year on year.
Key points of investment
Benefiting from high demand for transformers and trains, the company's magnet wire shipments were +23.25% year-on-year
In '23, the company achieved revenue of 5,020 billion yuan, up 27.20% year on year, net profit of 223 million yuan, up 27.54% year on year, electromagnetic wire sales of 70531.03 tons, up 23.25% year on year, mainly due to strong demand for flat electromagnetic wires for UHV transformers and new energy motors. Among them, sales of flat electromagnetic wire for transformers increased by about 25% year on year, and orders for flat electromagnetic wires for UHV transformers increased more than 2 times year on year, mainly due to increased investment in domestic power grids and accelerated construction of UHV transmission and transformation projects; Sales volume using flat magnet wire grew rapidly. Throughout the year, 16 new mass production projects and 22 new targeted projects were added, and conductive battery pack products were developed and supplied to major domestic battery pack companies.
Implement the policy of “based locally, deeply cultivate channels, and expand electricity”, and continue to break through new markets and new customers
In '23, wire and cable achieved revenue of 10.099 billion yuan, up 13.04% year on year, achieved net profit of 347 million yuan, up 41.62% year on year, sales volume of 2.79 million kilometers, up 12.65% year on year. Mainly by adhering to the 12-character policy of “based locally, deeply cultivating channels, and expanding electricity”, based on five major cable production bases, 1) Deeply cultivate the local core regional markets in Hunan, Hubei, Sichuan and Jiangxi, 2) Continuously explore the market: the company continues to strengthen the strategic development of the main power network market and reach the national grid Sichuan, Chongqing, Fujian Henan, Zhejiang, etc. Ten provinces won the bid to achieve performance breakthroughs in the three empty markets of Heilongjiang, Jilin, and Shanghai power grids; 3) The company focused on channel and major customer development, and continued to expand its business scale. It was shortlisted for “five big six small” power generation groups such as China Energy, China Huaneng, China Huadian, and China Datang, as well as strategic customers such as China Railway, China Metallurgical, China Communications, China Construction Science and Engineering, Hengyuan Petroleum, and Dongfang Electric.
Exports benefit from high demand for overseas transformers. The expansion of motor electromagnetic wire production capacity is progressing steadily. The developed regions of Europe and the United States have increased the share of new energy generation due to early electrification, which has jointly promoted the concentrated explosion of overseas power equipment demand (especially power transformers). The company's direct export sales of flat electromagnetic wires increased by about 26% year on year. The company participated in the Asian Power Exhibition, the 3rd China-Africa Economic and Trade Fair, and the Berlin Coil Exhibition, Shanghai International Coil and Motor and Transformer Exhibition, strengthening product promotion in international markets. Having learned more about the demand for flat electromagnetic wires for overseas power transformers, it is expected to fully benefit from the continued high demand for overseas transformers. With the gradual introduction of the trade-in policy, demand for new energy vehicles continues to be high. Due to the continuous increase in the penetration rate of flat wire motors, the second phase of the company's flat magnet wire construction project for new energy vehicle motors was completed in batches in the first half of 2023, and production capacity was gradually released in an orderly manner. Currently, it basically has 20,000 tons of production capacity. With the official commencement and steady progress of the third phase of the comprehensive capacity expansion project, shipments of magnetic wires for new energy vehicle motors are expected to increase rapidly.
Profit forecasting and valuation
Maintain profit forecasts and maintain a “buy” rating. The company is a global leader in flat magnet wire and an advantageous enterprise in the cable industry. It has benefited from high prosperity in many downstream fields, and the release of production capacity guarantees steady growth in performance. We maintain the 24-25 net profit forecast of 6.01 million yuan and 741 million yuan, and add the 2026 net profit forecast of 911 million yuan, corresponding EPS of 0.82, 1.01, and 1.24 yuan/share. The PE corresponding to the current stock price is 11, 9, and 8 times, respectively. Maintain a “buy” rating.
Risk warning
The risk of continuing macroeconomic pressure; the risk of fluctuations in raw material prices; the risk of increased market competition.