Key points of investment

2024Q1 revenue was +1% YoY, net profit to mother +9% YoY, and after deducting non-net profit +37% YoY. Overall performance was in line with market expectations. The company released its 2024 quarterly report, achieving revenue of 1.31 billion yuan, and net profit of 95 million yuan compared to the same period, +9%, net profit of 101 million yuan, +37% year over year. The slow revenue growth was mainly due to the high base caused by the domestic customer delivery pace compounded by the poor off-season last year. We expect the Q2 revenue confirmation revenue stream to grow rapidly. The faster growth rate of net profit after deducting non-net profit is mainly due to a year-on-year decrease in government subsidies, which is in line with overall market expectations.

Looking at the breakdown, power equipment revenue is 1.13 billion, accounting for 87%; energy storage revenue is 110 million, accounting for 8%; and digital revenue is 60 billion, accounting for 4%. The business ratio is basically the same as for the full year of '23. Domestic sales revenue was 9.1 billion yuan, and export sales revenue was 390 million yuan, accounting for 30%. The overseas ratio increased to overall gross margin to 25.4%, +2.7 pct/+1.0 pct compared with the same period last month, and the logic of improving overseas profit structure began to be interpreted!

Overseas orders for transformers and next year's profit will be raised again. Since the beginning of the year, the company expects a rapid year-on-year increase in overseas orders. Benefiting from the continued shortage of transformers in the US and European markets, the company's order growth rate is expected to grow faster on this basis. Due to the long delivery period, the profit growth rate is expected to increase again next year. At the same time, orders for the company's oil to new categories began to start, and overseas oil became out of stock and corresponding price increases were stronger than dry changes. As a result, an increase in the share of overseas revenue+a higher ratio of oil to gross profit further boosted the company's profit center.

Profit forecast and investment rating: We maintain the company's 2024-2026 net profit of 7.53/11.35/1,418 billion yuan, respectively, +49%/+51%/+25% compared to the same period, corresponding PE of 27 times/18 times/14 times, and a target price of 51.9 yuan for 30 times PE for 24 years, maintaining a “buy” rating.

Risk warning: Overseas market expansion falls short of expectations, increased competition, higher raw material prices than expected, etc.