2023 Results Exceed Our Expectations
The company released its 2023 annual report: total revenue of 4.20 billion yuan, +26.91% year-on-year; net profit to mother of 982 million yuan, +47.90% year-on-year. Looking at 4Q23 alone, the company achieved revenue of 1,328 billion yuan, +43.84% year-on-year, +33.53% month-on-month, and net profit of 314 million yuan to mother, 61.17% year-on-year, and +35.37% month-on-month. The performance exceeded our expectations, mainly due to high overseas revenue growth and improved profitability.
Development trends
Overseas: High performance growth is expected to continue, and more products and channels will blossom. In 2023, the company's overseas revenue was 2,791 billion yuan, +51.29%; on the product side, smart electricity/intelligent power distribution/new energy were 25.61/1.71/113 million yuan, respectively, +41.72%/406.67%/672.38%; on the regional side, Africa/Asia/Latin America/Europe were 10.02/8.72/7.99/118 million yuan, respectively, +156.66%/32.25%/3.60%/428.20%. Looking ahead, 1) Smart electricity use: China's total electricity meter export value was +17.83% YoY in 2023, and the total export value was +27.3% YoY in January-January 2024, further accelerating. We are optimistic about the steady growth in demand for overseas electricity meters. The company has initiated factory layout plans in Europe and Latin America to accelerate the development of new markets. 2) Intelligent power distribution: In 2023, the company won the bid and delivered the African market distribution network collection project, and won the bid for the repeater product in Brazil in 1Q24. We are optimistic about channel synergy between power distribution equipment and meters, and accelerate overseas to open up the growth ceiling. 3) New energy: The company focuses on building the advantages and channels of complete new energy equipment, and markets such as Africa, Europe and Latin America have successively reaped benefits.
Domestic: Electricity meter tenders are expected to accelerate, and electricity distribution and new energy sources will gradually enter the harvest period. In 2023, the company's domestic revenue was 1.372 billion yuan, of which smart electricity use/smart power distribution/new energy were 10.34/2.89/50 billion yuan respectively, -4.84%/-5.47%/+78.14%. Looking ahead, 1) Smart electricity use: We are optimistic that the 2024 tender amount will be +30% or more. The switch in electricity meter standards and emerging demand are expected to drive a high number of electric meter tenders. The average annual tender volume of electric meters from 2024 to 2028 may remain high at 80 to 90 million units, and the company, as a core supplier, is expected to fully enjoy the dividends of this cycle. 2) Intelligent power distribution: We believe that distribution network investment is expected to pick up steadily at the end of the “14th Five-Year Plan”. The company achieved a breakthrough in South Grid collection and distribution network equipment for new energy projects in 2023, and is optimistic that market development will gradually enter the harvest period. 3) New energy: In 2023, the company won the bid for the 10-million-level charging station EPC project.
Profitability continues to increase. In 2023, the company's gross profit margin was 41.90%, +3.67ppt, mainly due to lower raw material prices, depreciation of RMB, and an increase in the share of system software and solutions (accounting for 60% of overseas smart electricity business revenue); the cost ratio for the period was 13.64%, -2.98% compared to the same period, showing results in cost control.
Profit forecasting and valuation
Considering that overseas business exceeded expectations, the 2024/2025 net profit forecast was raised 20%/17% to 1,198/1,405 billion yuan. The current stock price corresponds to 2024/2025 17/15 times the price-earnings ratio. Maintaining an outperforming industry rating, considering the profit forecast adjustment and valuation switch to 2024, and raising the target price by 46% to 47.00 yuan, corresponding to the 19/16 price-earnings ratio in 2024/2025, there is still room for the stock price to rise 13%.
risks
Overseas business risks, competition intensified, and the development of the new energy channel business fell short of expectations.