Incident: Yinghantong released its 2023 annual report and 2024 quarterly report: In 23, the company achieved revenue of 493 million yuan (YoY +27.52%), net profit of 93.95 million yuan (YoY +33.55%), net profit of 86.84 million yuan (YoY +39.69%), gross profit margin of 51.47% (YoY +3.39pct), net profit margin 19.04% (YoY +0.86pct); 24Q1 achieved revenue of RMB 106 million (YoY +12.58%) Profit of 16.29 million Yuan (+74.65%), net profit not attributable to mother of 14.75 million yuan (YoY +88.50%), gross profit margin 52.83% (YoY +4.97pct), net profit margin 15.34% (YoY +5.45pct).

Power grid and industrial IoT communication products are growing rapidly, and gross margins have increased significantly. By business: in '23, the company's industrial IoT communication products achieved revenue of 284 million yuan (YoY +25.14%), gross margin of 55.55% (YoY +3.08pct); intelligent distribution network condition monitoring system products achieved revenue of 127 million yuan (YoY +58.15%), gross margin of 45.38% (YoY +6.55pct), intelligent sales control system products achieved revenue of 52.18 million yuan (YoY -10.31%), gross margin of 32.18% (YoY -3.74pct), technical services and others Revenue of 29.44 million yuan (YoY +56.60%), gross margin was 72.88% (YoY -3.19pct). The company's comprehensive gross margin was 51.47% (+3.39pct year on year), mainly due to the increase in exchange rates in 2023, which led to an increase in the sales unit price of foreign subsidiaries in RMB, while the cost was relatively stable. At the same time, the gross margin of domestic smart distribution grid condition monitoring system products increased.

Overseas business accounts for more than one-third. Looking at the subregion: the company's domestic revenue in '23 was 314 million yuan (+29.22%), gross margin was 45.50% (YoY +3.27pct); foreign revenue was 179 million yuan (+26.49% year over year), and gross margin was 62.01% (+3.37pct year on year). The company's new products, vehicle gateways and Xinghan Cloud management network solutions, have entered markets such as North America and Europe. Customer satisfaction continues to increase, and mass sales have been formed.

Profitability improved significantly in 24Q1, and contract liabilities continued to rise. The 24Q1 company's profit growth rate was significantly higher than the revenue growth rate. The gross margin for the single quarter was 52.83% (+4.97pct year on year). Furthermore, due to the increase in 24Q1 interest income and exchange profit and loss, financial expenses improved (24Q1 was -3.11 million, 23Q1 was 1.13 million). The 24Q1 contract debt was 39.93 million, an increase of 15.80% over the end of 23. The operating trend is good.

Profit forecast: We expect the company's revenue for 2024-2026 to be 651 million yuan, 888 million yuan and 1,144 million yuan respectively, net profit to mother of 130 million yuan, 180 million yuan and 257 million yuan respectively, and EPS of 177 yuan, 2.45 yuan and 3.49 yuan respectively. Referring to the company's historical valuation and the average valuation level of comparable companies, the company was given a 2024 dynamic PE range of 25-30X, corresponding to a reasonable value range of 44.14-52.96 yuan, which is “superior to the market” rating.

Risk warning: Distribution grid capital expenditure falls short of expectations, and overseas market expansion falls short of expectations.