Incidents:

The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 4.948 billion yuan, +52.91% year over year, and realized net profit of 498 million yuan, +87.67% year over year. Among them, 23Q4 achieved operating income of 1,645 billion yuan, +32.09% year over year, and realized net profit of 179 million yuan, or +85.93% year over year. The 24Q1 company achieved operating income of 1,034 billion yuan, +46.35% year on year, and realized net profit of 90 million yuan to mother, +104.30% year over year. The performance exceeded expectations.

Revenue from the new energy sector has increased, and the share of photovoltaics and energy storage has increased

By industry, the company achieved revenue of 2,074 billion yuan in 2023, +83%; the wind power industry achieved revenue of 1,376 billion yuan, +22% year-on-year; and the energy storage industry achieved revenue of 668 million yuan, +237% year-on-year. Compared with 2022, the PV industry's share of line revenue increased from 35% to 42%, and the energy storage industry's share of revenue increased from 6% to 13%. Benefiting from cost advantages brought about by strengthened supply chain management and technological progress, the gross margin of the new energy sector in 2023 was 22.73%, up 1.52% year on year.

Indirect overseas going+global layout is two-wheel drive. Overseas business growth can be expected in 2023. The company will rapidly expand the company's popularity in the international market through cooperation with well-known domestic leading new energy companies. At the same time, the company promoted the global layout of its business in an orderly manner, focusing on improving key capacity building such as overseas marketing, quality control, product design plans, and services, and initially established a two-wheel drive strategic model with indirect overseas going+global layout. The company has obtained certification from a series of domestic and foreign authorities such as China's CQC, US UL, EU CE, and European DNVGL, laying a solid foundation for the company's global layout.

Lay out high-voltage high-capacity products, and continue to develop and provide new kinetic energy companies that continue to break through high-voltage high-capacity products. High-voltage main transformer products such as 110/220 kV and GIS with a voltage rating of 110 kV have been shipped in small quantities, and GIS with a voltage rating of 252 kV has also begun to be put on the market.

In the field of ocean wind, the company developed a 66kV prefabricated intelligent offshore boosting system and 72.5kV environmentally friendly gas-insulated switchgear, which raised the booster from 35 kV to 66 kV. We believe that as the sea landscape gradually recovers in 2024, the advance layout of the company's new products is expected to create a second level of growth.

Profit Forecasts, Valuations, and Ratings

We expect the company's revenue for 2024-2026 to be 67.20/88.26/10.743 billion yuan, respectively, with year-on-year growth rates of 35.80%/31.35%/21.72%, net profit to mother of 6.52/8.80/1,099 billion yuan respectively, year-on-year growth rates of 30.93%/35.02%/24.86%, EPS 2.09/2.82/3.52 yuan/share, respectively, and a 3-year CAGR of 30.20%. In view of the high growth of the company's overseas business, based on comparable company valuations, we gave the company 21 times PE in 2024, with a target price of 44 yuan, maintaining a “buy” rating.

Risk warning: Domestic new energy installations fall short of expectations; overseas customer expansion falls short of expectations