Event: On April 25, 2023, the company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 51,573 billion yuan, a year-on-year increase of 10.13%; realized net profit of 7.184 billion yuan, an increase of 11.44% over the previous year; realized deducted non-net profit of 6.95 billion yuan, an increase of 10.43% over the previous year. 2024Q1 achieved revenue of 7.699 billion yuan, an increase of 24.25% over the previous year; realized net profit of 596 million yuan, an increase of 13.69% over the previous year; and realized net profit of 548 million yuan without return to mother, an increase of 16.38% over the previous year.
Profitability remains stable. In terms of profitability, the company's gross margin in '23 was 26.80%, down 0.24pct year on year; net margin was 14.83%, up 0.09pct year on year. In terms of cost control, the fee rate for the 2023 period was 12.36%, up 0.56pct year-on-year. Among them, the sales/management expenses ratio was 4.04%/2.46%, respectively, an increase of 0.29pct/0.01pct year-on-year.
The marketing results are impressive, and the number of new contracts signed in 23 years has increased. In '23, the volume and quality of the company's domestic business increased sharply, and new contracts of 58.287 billion yuan were signed throughout the year, an increase of 12.64% over the previous year. In terms of UHV, the company won the bid for four ±800kV UHVDC projects in Hami - Chongqing, Jinshang - Hubei, Longdong-Shandong, and Ningxia - Hunan, as well as digital construction projects for 13 1000kV UHV substations including Nanyang in Henan and Lanjiang in Zhejiang.
Overseas, major projects such as Chilean smart meters, Brazilian screen control cabinets, Saudi SVG, and South Africa energy storage were successfully signed, and projects such as the supply of the Indonesian AMI main station system and the Chilean substation project were successfully put into operation.
Focus on R&D investment and lead technological breakthroughs. In 2023, the company invested 3.459 billion yuan in R&D for the whole year, accounting for 6.71% of revenue. In 2023, the company made a new breakthrough in technical research, conquered the new power system relay protection architecture and key technologies, and connected the UHVDC control and protection system based on domestic chips to operate on the grid. An integrated source network load storage solution with network construction technology as the core was proposed and successfully demonstrated. We developed the world's first controllable commutation converter valve (CLCC), a safe and stable adaptive emergency control system for power grids in highly uncertain environments, a static synchronous camera based on supercapacitors, and grid-supported SVG, built the first domestic SFC system for spot electricity purchases in China, and developed the first domestic SFC system in the industrial and water conservancy fields. The high-reliability 4500V crimping IGBT product has passed the China Telecommunication Union's new product technology certification, and the comprehensive technical performance indicators have reached the international advanced level.
Investment advice: The company is a leader in secondary equipment for power grids. The three key points of UHV, intelligent digitization of electricity, and intelligent distribution networks support steady improvement in performance. We expect the company's revenue for 24-26 to be 568.20, 630.54, and 70.491 billion yuan, respectively, with growth rates of 10.2%, 11.0%, and 11.8%; net profit to mother of 80.65, 90.76, and 10.135 billion yuan, respectively, with growth rates of 12.3%, 12.5%, and 11.7% respectively. The closing price on April 26 was 24, 21, 19 times the company's 24-26 PE. Maintain a “Recommended” rating.
Risk warning: Grid investment falls short of expectations; market competition increases risk.