The company is one of the enterprises with the highest product voltage rating, the most complete product variety, and the strongest engineering capabilities in high-voltage AC/DC transmission and distribution equipment in China. It maintains advanced competitiveness in the field of major primary equipment. In recent years, the company's operating quality and operating performance have been relatively good. In the future, it is expected to enjoy the dividends of UHV and HV power grid construction. For the first time, it has been covered and rated for an increase in holdings.

One equipment leader, the most comprehensive product coverage. The company is a state-owned electric power equipment enterprise with a rich history. It is currently the enterprise group with the most complete product categories, the highest voltage rating, and the strongest complete engineering capabilities in the field of power transmission and transformation equipment in China. The company's leading products include high and medium voltage switches, transformers, reactance and power capacitors, transformers, lightning arresters, DC transmission converter valves, etc., and its main business is highly competitive; its testing and testing subsidiaries are responsible for centralized management of six major types of power equipment in China. At the same time, the company can also provide complete operation and maintenance services and engineering turnkey support services.

2023 performance analysis. The company's 2023 revenue, net profit attributable to mother, and net profit deducted from non-net profit of RMB 210.5, 885, and 640 million yuan, increased by 12.2%, 43%, and 142.5%, respectively. Among them, the company's transformer business grew sharply by 40%, switches, capacitors and lightning arresters grew by more than 20%, and the DC business declined by 30% due to bid wins and deliveries. The overall profit level has improved. The company has maintained a good profit quality over the past few years. The credit sales ratio has continued to decline, and the statements are relatively healthy. Currently, the net cash on hand is close to 10 billion yuan.

There is support for the company's sustainable operation. In 2023, the company won a significant year-on-year increase in the amount of substation equipment for the State Grid Corporation's power transmission and transformation project, ranking 1st with a market share of 7.6%. Among them, combination appliances and transformers ranked 2nd with a market share of 16% and 13% respectively. The rest of the reactors/lightning arresters also had a high market share. Overall, the company ranked high in the primary equipment category. In the international market, the company increased its quality, and the total number of new contracts signed for equipment exports doubled. On the reporting side, the company's contract debt at the end of 2023 was 3,830 billion yuan, +59.5% year-on-year. On the industry side, domestic electricity consumption has increased beyond expectations in recent years, while transmission and distribution prices have increased slightly. The expansion of the electricity bill pool guarantees the ability to invest in power grids, while the increase in electricity consumption and peak load, long-term pressure on new energy consumption, and the emergence of new demand such as electric vehicles have all brought about long-term and objective demand for power facilities. Electricity investment will continue to grow at a certain level in the future, and the company's sustainable operation is supported.

The company's high-pressure business may be flexible. The company's DC converter valves, converters, UHV AC switches, GIS and other products are highly competitive. Future UHV/UHV power construction is an important path for possible new energy consumption. After the pressure on new energy consumption increases further in the future, UHV power grid construction may accelerate, and the company may have some flexibility.

Investment advice: The company's business is competitive, industry demand is still growing, and future development is sustainable; the company's net profit returned to mother in 2024 and 2025 is estimated to be 1,286 billion yuan and 1,703 billion yuan, giving it an “increase in wealth” rating.

Risk warning: Power construction falls short of expectations, the company's bid falls short of expectations, multiple business management risks.