Key points of investment
Incident: The company announced its 2024 quarterly report. 24Q1 achieved revenue of 902 million yuan, +14% year on year, net profit of 214 million yuan, net profit of 214 million yuan year on year, +32% year on year; Q1 gross margin of 44.25%, +5.61 pct year on year, net interest rate of 23.71% year on year, +1.53 pct year on year, net profit margin of 23.79% year on year, +3.27pct year on year. The results are in line with market expectations.
The trend of upgrading overseas electricity distribution has not changed, and the demand for industrialization support in emerging markets is certain. The export value of 24Q1 electricity meters was about 2,284 billion yuan, +12% year over year, and Africa +11% year over year in March. Demand from developing countries remained strong during the Q1 off-season. By the end of '23, the company's software products had been used in more than 130 projects in overseas markets. With the economic development of countries and regions in Asia, Africa, and Latin America, the requirements for accuracy and automation in electricity bill measurement and collection continued to increase, and the increase in AMI penetration was the general trend. As a leading supplier of system solutions in developing countries, we expect the overseas electricity business to maintain steady growth in 24 years.
Actively laying out the power distribution & new energy business, 24 is expected to be the year the second curve begins. The company is actively expanding power distribution and overseas new energy business. The product side launched new energy supporting products such as DC junction boxes, low voltage distribution cabinets, and photovoltaic boosting all-in-one machines. The distribution products won the bid for the African market collection project, actively expanded major domestic off-grid new energy customers, and expanded the new energy market overseas. 24 is expected to be the beginning of the second curve.
The overall cost ratio is stable, and the cash flow is sufficient. The expense ratio for the 24Q1 period was 14.71%, -0.07pct year on year. The Q1 company's net cash flow from operating activities was 308 million yuan, +1332% year over year, mainly due to low base and low payment expenses for the same period last year. The company's cash balance was 4.466 billion yuan, mainly large deposit books, rich interest income, and strong operating resilience to risks.
Profit forecast and investment rating: We maintained the company's net profit of 12.1/15.1/1.85 billion yuan respectively for 24-26, +23%/25%/23% year-on-year, and PE corresponding to the current price at 19x, 15x, and 12x respectively, maintaining a “buy” rating.
Risk warning: Overseas market expansion falls short of expectations, domestic market competition intensifies, overseas project execution progress falls short of expectations, etc.