Incident: The company released its 2023 annual report: in 2023, the company achieved operating income of 2,537 million yuan, a year-on-year increase of 42%; net profit to mother was 281 million yuan, an increase of 37%; net profit after deducting non-return to mother was 264 million yuan, an increase of 37% over the previous year. Among them, Q4 achieved operating income of 903 million yuan, an increase of 32%; net profit to mother of 121 million yuan, an increase of 74% year on year; net profit after deducting non-return to mother of 117 million yuan, an increase of 96% year on year.
Comment:
High revenue growth and improved profitability of the energy storage business: In 2023, the company's energy storage system technology service business achieved revenue of 726 million yuan, +123% year-on-year, gross profit margin of 15%, and +3pct year-on-year. The company has accumulated many years in the field of energy storage system technology services. It has mastered core key technologies such as energy storage system integration, optimization and safety protection technology, energy storage system simulation modeling and grid-connected performance testing technology, energy management and optimal control technology, and has rich project implementation experience. In 2023, the company completed a total installed energy storage capacity of 245 MW/375 MWh. The rapid increase in revenue is mainly due to the completion and acceptance of some large-scale energy storage EPC projects, such as the Guangxi Power Grid Nanning Wuming Energy Storage Project, the first 100 megawatt-hour energy storage station in Guangdong Province, and the world's first submerged liquid-cooled energy storage station, the South Grid Energy Storage Wuhua Power Grid Side Energy Storage Project. The gross margin is mainly due to the higher gross margin of individual large-scale projects.
The revenue of the test and testing business increased, and the gross margin declined: in 2023, the company's test testing and commissioning service business achieved revenue of 582 million yuan, +65% over the same period, and a gross profit margin of 42%, or -5 pct year-on-year. The rapid increase in revenue is mainly due to the continuous expansion of the scale of the division's grid-side testing and inspection business, and the increase in business brought about by the acquisition of new subsidiaries.
The decline in gross margin is mainly due to the high cost of materials for some projects such as zero discharge of wastewater and automated transformation. The gross margin of the project is low, which has lowered the gross profit margin of the test and inspection business.
In the smart device business, the intelligent electricity distribution business performed excellently: in 2023, the company's smart device business achieved revenue of 1,127 billion yuan, +14% year over year, gross profit margin of 32%, and +2 pct year over year. Among them, the intelligent power distribution equipment business achieved revenue of 442 million yuan, +32% year-on-year, and +8pct; the intelligent monitoring equipment business achieved revenue of 258 million yuan, +5% year-on-year, gross profit margin of 35%, and +1 pct year over year; and the robot and drone business achieved revenue of 275 million yuan, -7% year-on-year, gross profit margin of 30%, and -3 pct year over year. The increase in revenue and gross margin of the intelligent power distribution equipment business is mainly due to the company's independent development and launch of the iNOS system and core modules.
Profit forecast, valuation and rating: Due to increased competition in the domestic energy storage industry, we lowered the company's profit forecast for 24-25 and added a profit forecast for 26 years. We expect to achieve net profit of 4.26/6.25/811 million yuan (28% downgrade/25% downgrade/increase) in 24-26. The current stock price is 39/26/20 times PE for 24-26.
The company is backed by Nanwang Group, and the rapid growth in energy storage business orders drives overall performance. The future shows more room for growth and maintains a “gain” rating.
Risk warning: Energy storage business order growth falls short of expectations; investment in power grid construction falls short of expectations.