Event: On April 25, the company released its 2023 annual results report. Throughout 2023, the company achieved operating income of 51,573 billion yuan, an increase of 10.13% over the previous year; realized net profit of 7.184 billion yuan, an increase of 11.44% over the previous year; after deducting non-net profit of 6.950 billion yuan, an increase of 10.43% over the previous year.
The 2023 performance grew steadily and continued to play a leading role in the industry: throughout 2023, the company achieved operating income of 51,573 billion yuan, an increase of 10.13% over the previous year; realized net profit of 7.184 billion yuan, an increase of 11.44% over the previous year; after deducting non-net profit of 6.950 billion yuan, an increase of 10.43% over the previous year. Looking at revenue splitting, the company's business classification changed in 2023. Smart grid revenue was 25.635 billion yuan, up 2.57% year on year; digital energy integration revenue was 11.134 billion yuan, up 21.73% year on year; low carbon energy revenue was 9.638 billion yuan, up 33.47% year on year; industrial connectivity revenue was 3.69 billion yuan, down 3.01% year on year; integration and other revenue was 1,889 billion yuan, down 10.53% year on year.
On the cost side, the company's sales expenses, management expenses, and R&D expenses in 2023 were 2,085 billion yuan, 1,267 billion yuan, and 2,712 billion yuan respectively, up 18.59%, 10.78%, and 13.92% year-on-year respectively. Overall, in 2023, the company will focus on promoting high-quality enterprise development, continuously optimizing the industrial layout, and continuing to play a leading role in the industry in core technology, key resources, and talent reserves in the modern industrial chain of new power systems.
Domestic and foreign business expanded in both directions, and there were plenty of orders in hand: during the reporting period, the company showed results in business development both domestically and internationally. Throughout 2023, the company's traditional dominant business continued to be consolidated. The next-generation scheduling technology support system completed the first batch of 6 pilot projects, and batch deployment was achieved in the spot market, next-generation centralized control, and next-generation use. Autonomous and controllable safety devices, reliable computing products for distribution networks, and 5G terminals for electricity have achieved serial applications. Emerging businesses have accelerated development. During the reporting period, autonomous control of 1200V and 1700V medium and low voltage IGBT products and connected applications of 3300V and 4500V high voltage IGBT products have been realized. International business also picked up rapidly at the same time. During the reporting period, the company signed major projects such as CGE smart meters with Chile, and major projects such as Indonesia's AMI master station system were successfully put into operation. Looking at domestic and overseas revenue, the company's domestic business revenue in 2023 was 50,070 billion yuan, up 8.72% year on year, and overseas revenue was 1,394 billion yuan, up 104.07% year on year, gross margin was 23.25%, +5.43 pct year on year. Overseas business achieved both revenue and gross margin increase. In terms of orders, the company had orders of 49.852 billion yuan at the end of the reporting period, up from 27.427 billion yuan. The number of orders covered the establishment of 2 new wholly-owned subsidiaries in 2023, which is expected to continue to empower the parent company in the future: During the reporting period, the company invested in the establishment of two new wholly-owned subsidiaries, Nanrui Ruiteng and Shenzhen Nanrui, to vigorously expand its innovation business and serve the high-quality development of the Greater Bay Area industry. Nanjing Nanrui Ruiteng mainly focuses on IT basic software and hardware products and related services, while Shenzhen Nanrui mainly focuses on renewable energy generation secondary power generation, artificial intelligence applications, and industrial design services.
Xinchuang, artificial intelligence, etc. are all national key strategic development directions. The company has set up relevant wholly-owned subsidiaries, showing the company's determination to respond positively to the country's strategic development and continuously optimize the industrial layout. As the first batch of artificial intelligence innovation application pilot zones certified by the Ministry of Industry and Information Technology and an artificial intelligence innovation development experimental zone determined by the Ministry of Science and Technology, according to the “White Paper on Artificial Intelligence Development 2023”, the scale of the AI industry in Shenzhen reached 248.8 billion yuan in 2023, and has initially formed a complete AI industry chain covering the basic, technical and application layers. We anticipate that while the company provides services in the Greater Bay Area through subsidiaries, it is also expected to benefit from industry trends in the future, empower the parent company, and further increase the parent company's performance.
Profit forecast and investment advice: The company's performance achieved steady growth during the reporting period, and both domestic and foreign business development showed results. At the same time, the company set up two subsidiaries during the reporting period to vigorously expand its Xinchuang business to meet the country's Xinchuang development needs, and is expected to empower the parent company's performance in the future. We are optimistic about the future development of the company and forecast that the company's 2024-2026 revenue will be $58.082 billion, 67.02 billion yuan and 80.52 billion yuan, net profit attributable to mother of 8.144 billion yuan, 9.110 billion yuan and 10.818 billion yuan, EPS 1.01/1.13/1.35 yuan, corresponding to PE 22.4X, 20.0X and 16.8X, maintaining the “buy” rating.
Risk warning: Market competition increases risk; new technology research and development progress falls short of expected risk; risk of loss of core technical personnel; management of internal control risks.