Matters:
The company released its report for the first quarter of 2024. In the first quarter of '24, the company achieved revenue of 255 million yuan, +11.6% year over month, and realized net profit of 30 million yuan, +45.7% year over year, and realized net profit without return to mother of 0.26 million yuan, +54.73% year over year.
Commentary:
The increase in profitability was compounded by a low base, and 24Q1 performance increased significantly. 24Q1's gross sales margin was 35.3%, up 7.8 pcts year on year, 1.5 pcts month-on-month, net profit margin 11.7%, 2.7 pcts year-on-year, and 9.6 pcts month-on-month. Due to the low season for the power grid industry in the first quarter, the company was full of orders in '23, and 24Q1 revenue increased 11.6% year over year. Under higher profit margins and a low base of 23Q1, net profit attributable to and withheld from mother achieved significant growth.
Expenses increased year-on-year during the period, and the balance ratio continued to decline. The overall cost rate for the 24Q1 period was 24.6%, up 4.6 pcts year on year and 0.9 pcts month on month. Among them, the sales/management/R&D/finance ratio was 9.1%/10.0%/5.9%/-0.4%, respectively, +1.8/+0.8/-0.1 pcts. The increase in the cost ratio during the period was mainly due to the company's increased sales, management investment and low base. The company's 24Q1 balance ratio was 28.7%, down 5.1 pcts year on year, 1.5 pcts month on month, and financial stability remained stable.
24Q1 Company achieved a major breakthrough in 500kv combination appliances. The company won the bid for 500kv for the first time in '23 (3.72 million yuan), and the combined electrical products won 53.265 million yuan in the first equipment tender for the State Grid 24 power transmission and transformation project, achieving a major breakthrough, which is expected to bring new increases this year.
Investment suggestions: Changgao Electric has been deeply involved in electrical equipment for more than 20 years, and its share of isolation switches is stable and high. The competitiveness of other primary and secondary equipment products continues to improve, and market channels are gradually being broadened. Currently, the company's financial impairment risks may have been gradually cleared, and the future growth path is clear. We expect the company to return net profit of 31/38/460 million yuan in 24-26 years, corresponding EPS of 0.50/0.61/0.73 yuan respectively, maintaining a target price of 9.5 yuan, and maintaining a “strong recommendation” rating.
Risk warning: Power grid bidding or construction falls short of expectations; marketing of the company's new products falls short of expectations; rising raw material prices weaken the company's profits.