1Q24 results are in line with our expectations
The company announced 1Q24 results: 1Q24 achieved operating income of 1,545 million yuan, +31.2% year on year; net profit to mother of 181 million yuan, +27.5% year over year; net profit after deducting non-return to mother of 179 million yuan, +23.5% year on year. The 1Q24 results were in line with our expectations.
Development trends
Leading secondary equipment companies are deeply involved in their main business to drive steady growth in performance. The company is based on technological innovation, focusing on the main business and deepening the main business. The main business continued to grow in 1Q24, and the amount of completed goods contracts increased compared to the same period last year. By business: 1) Power grid side: In January-March, the total amount of power grid investment reached 76.6 billion yuan1, an increase of 14.7% over the previous year. Of these, the total amount of power grid investment completed in March was 43.9 billion yuan, an increase of 25.8% over the previous year. Drive the company's grid-side order growth and performance improvement. The company won the bid amount of 0.54 to 55 billion yuan in the first batch of substation equipment/single source procurement tenders in '24, accounting for 13%/19%, ranking second. 2) Power generation side: The high increase in installed capacity of new energy from January to January is expected to drive up demand for secondary equipment and reactive power compensation equipment for new energy stations. Among them, in January-March, domestic photovoltaics added 45.7 GW of installed capacity, an increase of 35.9% over the previous year; domestic wind power added 15.5 GW of installed capacity, an increase of 48.9% over the previous year. The company is deeply involved in fields such as booster station equipment, prefabricated cabins, and reactive power compensation equipment, and we believe it is expected to benefit from continued high demand for new energy sources. 3) Other fields: The company continues to enrich its product matrix in the field of energy storage, launching high-safety liquid-cooled battery packs that can be applied to the power generation side/power grid-side/industrial and commercial energy storage, self-developed PLC power plant power management systems, etc.; providing hydrogen production power supplies and complete energy management protection systems in the field of hydrogen energy; and continuing to deploy other emerging fields.
The results of cost reduction and efficiency were obvious, and the cash flow performance from operating activities was impressive. 1Q24 achieved a comprehensive gross profit margin of 34.0%, due to 1Q23's high base of -3.2ppt year on year, but 4.7ppt compared to 4Q23; on the cost side, the company's sales/management/R&D/finance expense ratios were 7.7%/4.4%/9.8%/-1.3%, respectively, -1.25/-0.46/+0.36/ -0.22ppt, respectively, achieving a net profit margin of 11.78%, -0.4ppt year over year.
The 1Q24 company's net operating cash flow was 85.37 million yuan, +236.59% year-on-year.
Profit forecasting and valuation
The profit forecast for 2024 and 2025 remains unchanged. The current stock price corresponds to the 2024/2025 price-earnings ratio of 17.4x/14.8x. Maintaining an industry rating and a target price of 18.22 yuan, corresponding to 20.8 times the price-earnings ratio of 2024 and 17.7 times the price-earnings ratio of 2025, there is 19.5% upside compared to the current stock price.
risks
Investment in power grids fell short of expectations, new energy installations fell short of expectations, and industry competition intensified.