Incident: The company released its 2023 annual report. In 2023, it achieved operating income of 114.797 billion yuan, a year-on-year decrease of 2.40%, and achieved net profit of 285 million yuan, reversing losses from the previous year; 2023Q4 achieved operating income of 36.426 billion yuan, a year-on-year decrease of 7.94%, and realized net profit to mother of 536 million yuan, a decrease in year-on-year losses.
Energy equipment has maintained a growth trend, industrial equipment has remained relatively stable, and the revenue structure of integrated services has been optimized. In 2023, the company focused on its main business and optimized the industrial structure. Among the various businesses, the energy equipment sector benefited from a significant recovery in the coal-fired power generation business. Revenue increased 4.55% year on year to 58.648 billion yuan, and gross margin increased 1.61 pcts year on year to 19.66% year on year. The industrial equipment sector developed steadily, with revenue falling slightly by 0.32% year on year to 40.402 billion yuan. With the help of cost reduction and efficiency in the elevator business, gross margin increased by 1.18 pct to 16.76% year on year. The integrated services sector is in the process of continuous optimization of the industrial structure. Revenue fell 19.92% year on year to 21.387 billion yuan, while gross margin improved, increasing 5.29 pcts to 13.65% year over year.
The scale of new orders for coal power and nuclear power has increased rapidly, and the scale of ongoing orders can guarantee the company's long-term development. In 2023, the company added 137.21 billion yuan of new orders, up 3.0% year on year. Among them, coal power and nuclear power performed well, with new orders increasing by 84.2%/52.6% to 303.2/8.97 billion yuan respectively; wind power faced great pressure in the context of worsening competition in the industry, and the scale of new orders decreased by 60.8% year on year to 6.94 billion yuan. By the end of 2023, the company's on-hand orders were 265.76 billion yuan, a decrease of 2.77 billion yuan from the end of 2022; of these, there were plenty of orders for coal power and nuclear power, reaching 661.5/30.64 billion yuan respectively; the scale of orders for industrial equipment and integrated services remained basically the same as in 2022, at 152.6/97.37 billion yuan at the end of 2023, respectively.
Focus on high-end equipment manufacturing and continue to promote the layout of the new energy industry. On the basis of maintaining industry leadership in energy equipment businesses such as coal power and nuclear power, we focus on new energy equipment and actively expand multi-energy complementary businesses such as “wind and solar hydrogen storage”. While we have deep accumulation in the fields of wind power and energy storage, we are also developing businesses in the fields of hydrogen energy and photovoltaics:
Companies in the field of hydrogen energy actively provide solutions for the entire industry chain of “production, storage and utilization” and use electrolyzed water to produce hydrogen as an industrial breakthrough point. Currently, the production capacity of alkaline electrolyzers has reached more than 1 GW, and the production capacity of PEM electrolyzers has reached more than 200 MW.
The photovoltaic sector has actively entered the heterojunction photovoltaic industry. On December 28, 2023, the first module product of the high-efficiency photovoltaic cell and module project phase 1 (1.2GW) of the company's subsidiary Shanghai Hengxi Photovoltaic Technology Co., Ltd. was successfully launched in Haimen District, Nantong City, indicating that the company already has fully independent photovoltaic products, providing new support for the company's new energy industry layout and multi-energy complementary collaboration.
Maintaining a “buy” rating: The company's wind power business sector is under high competitive pressure (electric wind power lost nearly 1.3 billion yuan in 2023). As a prudent measure, we lowered our profit forecast. The company's net profit for 24-26 is 7/16/3 billion yuan (79% down/ 60% down/increase). The current A/H stock price is 98/32 times higher. In the context of China's energy structure transformation and industrial restructuring, the company is expected to use its leading advantages to further increase the market share of traditional dominant businesses. At the same time, with the support of the company's technological research and development advantages, the energy storage and hydrogen energy business is also expected to become a new performance growth point for the company, maintaining the “buy” rating for A/H shares.
Risk warning: Cost pressure due to rising raw material prices; overseas business risks due to geopolitical and other factors; risk of exchange rate fluctuations, etc.