Incident: The company released its 2023 annual report. In 2023, the company achieved revenue of 4.73 billion yuan, +3.9% year on year, net profit to mother of 60 million yuan, +17.4% year on year, and achieved net cash flow from operating activities of 658 million yuan, +108.21% year over year.
Operations continue to be repaired and profitability improved. In 2023, the company's gross profit margin and net profit margin reached 40.8% and 10.9% respectively, up 1.5 pct and 1.6 pct year-on-year from 2022, respectively, and profitability increased markedly compared to '22. On a quarterly basis, the company's revenue and profit were mainly confirmed in the fourth quarter. Q4 achieved operating income of 2.13 billion yuan and net profit of 40 billion yuan to mother. In terms of expenses, the company's sales expenses in 2023 reached 590 million yuan, +17.6% year over year, mainly due to a sharp increase in marketing expenses; management expenses reached 340 million yuan, -2.5% year over year; and R&D expenses of 520 million yuan, -8.1% year over year, mainly due to a decrease in travel and outsourcing service fees.
Digitalization of energy and the Internet are growing rapidly, and the strategy focuses on the power grid business. By business: (1) In terms of energy digitalization, in 2023, the company completed the launch of the marketing 2.0 system in Shanghai, Shanxi, Hubei, Hebei, Henan and other provinces, and achieved good results. At the same time, it continued to streamline non-grid digital business, and the team was further optimized. It achieved revenue of 2.32 billion yuan, an increase of 7.5% over the previous year, and gross margin of 40.3%, an increase of 2.3 pct over the previous year. (2) In terms of the energy Internet, in 2023, the company's living payment business had a cumulative total of more than 450 million users, more than 14 million daily active users, and more than 6,200 connected public service payment institutions; the “New Telecom” aggregation charging platform business maintained rapid development. By the end of 23, the platform had charging equipment coverage of more than 1.1 million, the number of registered platform users exceeded 11 million, and the annual aggregate charging capacity reached 4 billion kilowatts, doubling year-on-year growth. The energy internet business achieved revenue of 1,534 billion yuan, year-on-year +38.97 billion yuan. %, gross profit margin was 39.7%, down 9.2 pcts year over year. (3) The Internet TV business experienced a marked decline due to factors such as weakening customer demand, achieving revenue of 870 million yuan, or -32.3% year over year, but gross margin recovered significantly, reaching 43.7%, up 10.7 pcts from '22.
The layout of virtual power plants was increased, and there was a significant breakthrough in the electricity sales business. In terms of virtual power plant business, by the end of 2023, the company's distributed photovoltaic cloud platform had connected more than 200,000 photovoltaic power plants of various types, with an installed capacity of 13.5 GW.
On the basis of aggregating a large number of distributed new energy and electric vehicles, charging piles, energy storage, small and medium-sized industrial and commercial users, etc., the company carried out green power transactions, market-based electricity sales, demand response, and integrated optical storage and charging on the energy Internet platform to form a typical “virtual power plant” business operation model; it has gathered 2,000 distributed photovoltaic power plants to participate in green power transactions in the power market, obtained electricity sales licenses in 25 provinces, and obtained demand response or virtual power plant qualifications in Jiangsu, Sichuan, Guangdong, Shenzhen, etc., and the total number of electricity transactions exceeded 250 million degrees.
Investment advice and valuation: The company's revenue from 2024 to 2026 is expected to be RMB 5.332 billion, RMB 6.059 billion and RMB 7.054 billion respectively, with revenue growth rates reaching 12.8%, 13.6% and 16.4% respectively. Net profit to mother is 728 million yuan, 838 million yuan, and 996 million yuan respectively. Net profit growth rates will reach 20.5%, 15.1%, and 18.9% respectively, maintaining the “increase” investment rating.
Risk warning: Policy support falls short of expectations; market demand falls short of expectations; grid investment falls short of expectations.