Core views
The company released its 2023 annual report, and its annual performance increased by 28.03% year-on-year, maintaining a steady growth trend. Looking at the network, the investment scale of the power grid exceeded 500 billion dollars in 2023, a steady increase of 5.4%; UHV construction accelerated, the procurement of four DC UHV equipment was completed, and the company's network business grew steadily. Looking outside the network, thanks to the rapid development of the new energy and energy storage industry, the company's off-network business increased significantly, and led to the growth of supporting equipment. The company continues to promote international market development, and it is expected that overseas business will continue to increase. The company's domestic and international business has a multi-dimensional layout, and the DC business can be expected in the future.
occurrences
The company released its 2023 annual report. For the full year of 2023, it achieved operating income of 17.061 billion yuan, a year-on-year increase of 13.51%, net profit to mother of 1.05 billion yuan, an increase of 28.03% over the previous year; net profit after deducting non-return to mother was 869 million yuan, an increase of 21.82% over the previous year.
Among them, revenue for the fourth quarter was 6.397 billion yuan, up 8.17% year on year; net profit to mother was 233 million yuan, up 70.20% year on year; net profit after deducting non-return to mother was 150 million yuan, up 68.63% year on year.
Brief review
Stable performance growth in 2023, impressive growth in Q4
1) Revenue for the full year of 2023 reached 17.061 billion yuan, up 13.51% year-on-year. Net profit attributable to mother/net profit not attributable to mother were 1,05/869 million yuan respectively, up 28.03%/21.82% year on year. The company benefited from rising in-grid power grid investment, continued improvement in demand for new energy sources outside the grid, etc., driven by multiple dimensions, strong demand in the power equipment industry, and steady growth in the company's performance.
2) Revenue for the fourth quarter of 2023 was 6.397 billion yuan, up 8.17% year over year. Net profit attributable to mother/net profit not attributable to mother was 233/150 million yuan respectively, up 70.20%/68.63% year over year. On the performance side, 2023Q4's performance growth rate is impressive.
The increase in cash flow is obvious, and the expense ratio is well controlled
1) Significant increase in cash flow: net cash flow from operating activities was 2.75 billion yuan, up 56.53% year on year; net cash flow for the fourth quarter was 1.28 billion yuan, up 7.98% year on year; mainly due to strengthened repayment management, customer repayments increased.
2) Expense rate control is good, and R&D investment remains high: in 2023, the company's expense ratio was about 10.87%, an improvement over the previous year; mainly, the company effectively promoted cost reduction and efficiency in accordance with fiscal and taxation policies, and strengthened cost management. R&D investment was 794 million yuan, an increase of 13.60% year over year.
DC UHV construction is speeding up, and in-network business continues to improve
1) In 2024, a total of 4 DC UHV lines are expected to be approved in North Shaan-Anhui, Shaan-Xian-Henan, Mengxi-Beijing-Tianjin-Hebei, and Gansu-Zhejiang. Among them, Mengxi-Beijing-Tianjin-Hebei and Gansu-Zhejiang are expected to use flexible DC technology, and the company will fully benefit from DC UHV construction and the advancement of flexible DC technology.
2) The total amount of power grid investment in 2023 was 5275 billion yuan, a year-on-year increase of 5.4%. It is expected that grid investment will continue to improve in 2024. As one of the core suppliers of UHV converter valves in China, the company maintains the lead in the State Grid UHV market. The growth rate of the secondary power grid business is impressive. The State Grid recruitment ranking for protection and monitoring rose from 7th to 4th; the State Grid ranked first in the bid share for the first batch of electricity meters in 2024. Orders in the South Net market increased significantly year-on-year.
The contribution of off-grid new energy sources is increasing, and overseas markets are expanding steadily
1) The company made sector adjustments and established a new “New Energy and System Integration” section, which covers various businesses/products such as new energy engineering turnkey and system integration businesses, energy storage PCS, and SVG.
2) The off-network business continued to grow rapidly, and orders from major customers in the new energy market increased significantly over the same period last year. Digging deep into industry opportunities such as coal, data centers, hydrogen energy, etc., we have achieved breakthroughs in the coal and petrochemical industry with integrated optical storage and charging stations. Revenue from the new energy and system integration business in 2023 was 3,941 billion yuan, up 42.03% year on year; gross profit margin was 5.42%, up 0.32 pct year on year.
3) The international market is expanding steadily, and overseas business is growing rapidly. Overseas revenue reached 153 million yuan in 2023, a year-on-year increase of 98.00%; the gross profit margin was 20.02%, up 3.98 pcts year on year. Orders in the international market increased significantly. Projects such as Chile's AMI Phase II, Italy's medium voltage metering, and Saudi intelligent power distribution were signed; breaking through the middle and high-end markets in the Middle East, Europe, and South America; and European standard charging piles entered the Thai and Singapore markets.
Performance forecasts
The company's net profit for 2024/2025 is estimated to be 12.2/1.67 billion yuan, corresponding to PE 22.8/16.6x.