电网业务是公司的中坚业务，从历史表现来看，特高压和主网工程起量周期，公司往往有着较好的成长性和盈利能力。目前，特高压交直流工程已经进入起量周期。2023 年，国网特高压设备各批次合计招标415.4 亿元，同比增长11 倍。公司参与的十多种设备招标合计中标79.3 亿元，其中换流变压器、断路器、直流穿墙套管、开关等设备份额位居第一，组合电器份额位居第二，电抗器、电容器、换流阀系统等设备位居第三，中标表现良好。2023 年，国网输变电项目变电设备招标总金额达677 亿，同比增长34.4%，公司在所有参与的主要规模化企业中，中标金额和同比增速均排名第一，同比增长72.9%，整体份额达到7.89%，市场开拓效果显著。China Western Power: Leading Primary Equipment Company for Transmission and Transformation
The company is one of the largest manufacturers of high voltage, ultra-high voltage and UHV substation primary equipment in China. The company has successively provided complete equipment for China's first 1000kV UHV AC project and the first ±800kV UHVDC project, and has been deeply involved in the entire grand process of China's UHV projects. The company has a complete primary equipment industry chain layout. It has multiple manufacturing bases in Shaanxi, Sichuan, Liaoning, Shandong, Jiangsu, Shanghai, Guangzhou, etc., and its business covers the whole country. The company's historical revenue has remained stable, and profit fluctuations are relatively large, which is clearly linked to the UHV and UHV engineering cycles. We expect the company's profitability to improve significantly in the future as the peak of UHV and the main network reappears.
UHV leads power grid business to achieve breakthroughs
The power grid business is the backbone of the company. Judging from historical performance, the company often has good growth and profitability during the UHV and main grid engineering start-up cycles. At present, the UHV AC/DC project has entered the commissioning cycle. In 2023, the total number of tenders for each batch of State Grid UHV equipment was 41.54 billion yuan, an increase of 11 times over the previous year. The company participated in more than 10 kinds of equipment tenders and won a total of 7.93 billion yuan. Among them, equipment such as converter transformers, circuit breakers, DC wall bushings, switches and other equipment ranked first, combined electrical appliances ranked second, and equipment such as reactors, capacitors, and converter valve systems ranked third. The bid performance was good. In 2023, the total amount of substation equipment tenders for the State Grid transmission and transformation project reached 67.7 billion yuan, an increase of 34.4% over the previous year. Among all the major enterprises participating, the company ranked first in terms of bid amount and year-on-year growth rate, with a year-on-year increase of 72.9%, and the overall share reached 7.89%. The market development effect was remarkable.
In February 2024, the Development and Reform Commission and the Energy Administration issued the “Guiding Opinions on the High-Quality Development of Distribution Grids under the New Situation”. In the future, domestic distribution grid construction investment is expected to reach an accelerated inflection point, and demand for distribution grid-related products is expected to grow, helping China Western Power to reach the next level.
Continued re-empowerment of international, off-network, and management
1) International aspects: The company relied on its subsidiary Western Power International to develop international markets, and relied on subsidiaries Western Electric Egypt and Western Electric Indonesia, and Sun Company Western Electric Malaysia to lay out global industrial bases. XD has become an internationally renowned brand, competing on the same stage with major international brands such as GE and ABB. In 2021 and 2022, the company's overseas business revenue reached 4.255 billion yuan and 2.98 billion yuan respectively, accounting for 29.6% and 16.4% of the year's revenue, respectively. It has now exported to more than 100 countries and regions around the world, and has successfully entered developed regions such as Germany, the United States, and Singapore. 2) Off-grid aspects: In 2023, the company dug deep into the power supply and industrial user market, expanded market coverage and participation, and achieved “zero” breakthroughs for many products in public infrastructure industries such as rail transit and data centers. Among them, the cumulative number of bids won in the power supply market increased 79% year over year, Xikai Electric won 214% year over year, and the nuclear power market increased 166% year on year. At the beginning of 2024, Xidian achieved a “good start” in the market and successfully won the bid for Tongwei's high-efficiency crystalline silicon solar cell smart factory 220 kV substation construction project, etc. 3) Management aspects: China Electric Equipment Group has carried out management collaboration and innovation in various aspects such as procurement, personnel, finance, production capacity, scientific and technological innovation, and marketing, which has greatly enhanced the group's overall development momentum and China Western Power's management will. Furthermore, “Digital Western Power” will further promote the automation, digitalization, and intelligent transformation and upgrading of the company's traditional industrial chain, enabling cost reduction and efficiency.
Investment advice
In summary, we believe that the “quality” and “quantity” of the company's grid business orders will improve significantly, continue to gain strength in international and off-grid markets, and enhance product competitiveness. We expect that under the leadership of China Electric Equipment Group, the company's net profit attributable to shareholders of the parent company in 2024 and 2025 will be about 1.2 billion yuan and 1.83 billion yuan, respectively, and the corresponding valuations will be 32 and 21 times, respectively. Maintain a “buy” rating.
Risk warning
1. The direction of grid investment falls short of expectations; 2. The progress of power grid engineering falls short of expectations; 3. The risk that profit forecasting assumptions are not true or fall short of expectations.
