The revenue growth rate and net profit to mother exceeded market expectations. The company achieved revenue of 4.20 billion yuan in 2023, an increase of 26.91% over the previous year. Among them, 2023Q4 achieved revenue of 1,328 billion yuan, an increase of 43.88% year on year and 33.60% month on month. Net profit to mother was 982 million yuan, up 47.90% year on year. Among them, 2023Q4 achieved net profit of 314 million yuan, up 61.03% year on year and 35.34% month on month. Affected by supply chain cost reduction and benefiting from lower raw material prices, the company's comprehensive gross margin in 2023 was 41.90%, up 3.67pct year on year. Among them, the 2023Q4 gross margin reached 45.73%, up 6.39 pcts year on year, up 2.42 pcts month on month, and overall performance exceeded market expectations.
Expense rates increased during the period, and profitability continued to improve. The company's expense ratio for the 2023 period was 13.64%, down 2.97 pct from the same period last year. The main reason was that the sales expense ratio decreased by 1.37 pct compared to the same period last year, and financial expenses fell sharply due to exchange rate effects. The financial expenses ratio was -4.07%, down 0.41 pct year on year; the company's net interest rate in 2023 was 23.39%, up 3.33 pcts year on year, and profitability continued to improve.
Accelerating overseas market layout, the new energy business is expected to become the company's second growth pole. Relying on the five major overseas regional headquarters in Asia, Africa, Latin America, Europe and the Middle East to build a global marketing network, the new energy channel business built in South Africa has begun to contribute revenue and has also launched new energy channel business development in other advantageous markets. The company achieved revenue of 2,791 billion yuan in the overseas market in 2023, an increase of 51.29%, of which the overseas electricity distribution business revenue was 2,678 billion yuan, an increase of 46.32%; the overseas new energy business revenue was 113 million yuan, an increase of 672.38% over the previous year, exceeding market expectations .
The State Grid bid for the second batch of smart meters exceeded expectations, and the results can be expected. In the second tender notice of the year issued by the State Grid in 2023, the total number of smart meter tenders reached a record high, reversing the situation where tenders fell short of expectations in the first half of the year. The second batch of smart meters was opened on October 30, with a total amount of about 14.4 billion yuan. Since the replacement cycle of smart meters was 8 years, 2014-2015 was the peak tender period, and 90.99 million units were tenders respectively. Eight years later, the 2022 tender volume began to pick up. Stock replacement boosts performance release.
Profit forecast and investment suggestions: According to the China Grid's electricity meter procurement scale, cycle and order situation, and overseas business development, we expect the company to achieve revenue of 5.294 billion yuan/6.562 billion yuan/7.966 billion yuan respectively in 2024-2026 (the original 2024-25 forecast was 5.15 billion yuan/6.40 billion yuan), and net profit to mother is 1,194 billion yuan/1.5 billion yuan/1,826 billion yuan, respectively (the original 2024-25 forecast was 1.10 billion yuan/1.22 billion yuan), based on DCF The model raised the target price from 32.26 yuan/share to 54.21 yuan/share, and maintained the “better than market” rating.
Risk warning: 1. Grid investment falls short of expectations; 2. Gross margin has dropped sharply due to fierce market competition; 3. Prices of raw materials have risen sharply; 4. Exchange rate risk.