Key points of investment
Incident: On April 18, 2024, Jinka Intelligence released the 2023 Annual Report and the 2024 First Quarter Report. In 2023, the company achieved operating income of 3.175 billion yuan, up 15.91% year on year; net profit to mother was 409 million yuan, up 51.09% year on year; in the first quarter of 2024, it achieved operating income of 7.2 billion yuan, up 12.48% year on year, and net profit of 98.96 million yuan year on year, up 22.03% year on year.
The smart IoT business grew steadily, with significant cost reduction and efficiency gains in the first quarter. The company mainly provides customers with high-value, high-performance products and digital end-to-end overall solution services. The company's IoT solutions have now laid out two major application scenarios, digital gas and digital water services, and are gradually expanding to new scenarios such as hydrogen energy and process metering.
The company's main products include smart civil gas terminals and systems, intelligent industrial and commercial gas terminals and systems, intelligent utility management systems, and intelligent water terminals and systems. In 2023, it achieved main revenue of 1,864 million yuan, 658 million yuan, 373.1 million yuan and 279.1 million yuan respectively, an increase of 16.21%, 8.06%, 8.36% and 53.27% over the previous year. The first quarter of 2024 achieved operating income of 720 million yuan, an increase of 12.48% over the previous year, and achieved net profit attributable to shareholders of listed companies of 989.5772 million yuan, an increase of 22.03% over the previous year. The increase in the first quarter was mainly due to further increases in supply and demand, combined with cost reduction and efficiency. The company's 2023 profit distribution is expected to be based on 413,976,013 shares. A cash dividend of 5 yuan (tax included) is distributed to all shareholders for every 10 shares, and a total cash dividend of 206,988,006.50 yuan (tax included) is expected.
Digital gas continues to break through and achieve steady growth in performance. The company's smart gas terminal products cover the upper, middle and lower reaches, involving various products such as ultrasonic flowmeters, turbine and waist wheel flowmeters, NB-IoT smart gas meters, and ultrasonic gas meters. In 2023, the company's smart gas revenue was 2.52 billion yuan, up 13.88% year on year, accounting for 79.46% of the company's main revenue. It continues to lead the gas industry. The revenue of smart civil gas terminals and systems increased 16.25% year on year. According to the 2022 market survey data from overseas research institute Omdia, the company ranked first in the world in terms of market share of smart gas meters. In the industrial and commercial gas sector, as the domestic economy rebounded steadily and customer demand recovered, performance also grew steadily over the same period. The company also focuses on gas safety issues that the industry is concerned about, provides gas safety lifeline solutions, and has been successfully applied to various projects to protect the safe operation of the city and provide new growth points for the company's performance.
In terms of R&D and innovation, we actively promote research and development of new products and technologies such as new gas safety terminals, smart water terminals, communication modules, ultrasonic measurement, and process measurement. The company actively develops products such as mass flow meters and broadens the company's product line, with a view to promoting the company's sustainable and healthy development through high-quality transformation of products.
The favorable digital water policy is expected to form a second growth curve. The company's digital water solutions also use a cloud-pipe-end service architecture, covering intelligent terminal sensing, intelligent network transmission, intelligent data collection and smart business operations in water scenarios. The company NB-IoT smart water meter and ultrasonic water meter were successfully selected for the China Water Association's recommended company list due to their excellent quality and brand influence, and received many honors. The company reached cooperative relationships with group customers such as Beijing Water Supply Group, Shanghai Chengtou Water, Guangzhou Water Supply, China Environmental Water Investment, and China Water Investment. The digital water business revenue in 2023 was 279 million yuan, accounting for 8.79% of total revenue, an increase of 53.22% over the previous year.
The company established a joint venture with the Cangnan County Government and Wenzhou Public Utility to provide support for secondary water supply; signed strategic cooperation agreements with France's SUEZ Group, Grundfos (China), Handan Beike, etc., to jointly create a multi-scenario smart water construction plan. The “Outline of the National Water Network Construction Plan” indicates that it will effectively promote the construction of the country's backbone water network, enhance the ability to allocate water resources, and is expected to drive the development of digital water services. At the same time, according to the regulations of the National Quality Supervision Administration, 25mm caliber meters and below can be used for no more than 6 years, and 25-50mm caliber meters for no more than 4 years. Considering that there are still many overdue water meters, at least 44 million units need to be renewed every year. According to the “14th Five-Year Plan” for China's water meter industry, the penetration rate of smart water meters will increase to 60% by 2025, and the penetration rate is expected to increase steadily in the future.
Investment advice: With the increase in the penetration rate of the company's smart water products and the steady growth of civil gas products, the company is expected to maintain steady growth. The company's revenue for 2024-2026 is 39.11/47.45/ 5.461 billion yuan, up 23.2%/21.3%/15.1% year-on-year, and the company's net profit to mother is 5.20/6.17/ 757 million yuan, respectively, up 27.1% /18.9%/22.6% year-on-year, corresponding to EPS 1.23/1.47/1.80 yuan, PE 10.7/ 9.0/7.3; “Accumulated holdings - B” rating.
Risk warning: smart water falls short of expectations; market competition continues to intensify; accounts receivable are not collected in a timely manner