Incidents:
The company released its 2024 quarterly report. 2024Q1 achieved operating income of 1,305 million yuan, +0.60% year over year; realized net profit to mother of 95 million yuan, +8.57% year over year; and realized deducted non-net profit of 101 million yuan, +36.63% year over year.
Going overseas increased profitability, and net profit after deducting non-net profit increased year-on-year
In 24Q1, the company's export revenue was 388 million yuan, accounting for 29.9% of total revenue (23H1 was 18.5%); as the proportion of export sales increased, the company's gross sales margin increased 2.7 pct to 25.39% year on year, and net margin increased 0.4 pct to 7.16% year on year. The main reason why the growth rate of the company's net profit deducted was higher than the net profit attributable to mother is that of non-recurring profit and loss, profit and loss from disposal of financial assets etc. decreased by about 17.47 million yuan year on year, and government subsidies decreased by about 8.14 million yuan year on year, which lowered the company's overall performance.
The energy storage and digital business grew rapidly, forming a new growth curve. In the company's 24Q1 revenue structure, the power transmission, distribution and control equipment manufacturing industry achieved revenue of 1,133 million yuan, energy storage series products achieved revenue of 110 million yuan, and overall digital solutions achieved revenue of 57 million yuan. Compared with 23H1 energy storage revenue of 73 million yuan and the revenue volume of digital solutions of 71 million yuan for the full year of 2023, a significant increase over the previous year. On April 12, the company announced the signing of a new digital factory project contract of 297 million yuan. The new layout business is rapidly expanding, which is expected to form a new growth curve.
Large-scale overseas orders continue to be received, and domestic business is expected to resume with the release of production capacity. On April 18, the company signed 739 million yuan of various transformer contracts with overseas EPC customers; the company continues to develop high-voltage products to meet market needs, and launched new 72.5 kV dry-type transformers and 60 mVA/145 kV liquid immersion transformers, which is expected to continue to receive orders at home and abroad as the product matrix continues to be enriched. 24Q1's overall revenue remained flat year over year. We expect the power transmission, distribution and control equipment business to be under pressure in China in the short term, but it is expected that orders and deliveries for the domestic transformer business will increase with the further release of the company's new production capacity.
Profit Forecasts, Valuations, and Ratings
The company's digital solutions business signed new orders relatively well. We have raised our profit forecast for this business. We expect the company's 24-26 revenue to be 95.64/129.61/16.300 billion yuan, respectively, with year-on-year growth rates of 43.44%/35.52%/25.76%, respectively, and net profit to mother of 8.04/12.05/1,645 billion yuan, respectively. The year-on-year growth rates are 59.35%/49.86%/36.47%, EPS is 1.85/2.78/3.79 yuan/share, respectively, 3-year CAGR was 48.26%. In view of the company's significant brand and channel advantages in the European and American markets, with reference to comparable company valuations, we gave the company 28 times PE in 2024, with a target price of 51.8 yuan, maintaining the “gain” rating.
Risk warning: industry competition intensifies; raw material prices fluctuate greatly; overseas policy risks.