In 2023, revenue increased 19.44% year over year, and net profit to mother increased 284.47% year over year. In 2023, the company achieved revenue of 11.077 billion yuan, up 19.44% year on year; comprehensive gross profit margin of 21.38%, up 3.79 pct year on year; net profit to mother of 816 million yuan, up 284.47% year on year. We believe that the net profit growth rate of the company is higher than the revenue growth rate, mainly due to: (1) significant cost reduction and efficiency results, gross margin increased by 3.79 pct year on year; (2) management rate decreased by 1.36 pct year on year, etc.
Annual profit distribution plan: It is proposed to distribute a cash dividend of 2.12 yuan (tax included) for every 10 shares.
Rates declined year over year during 2023. In 2023, the company's rate for the period was 10.88%, a year-on-year decrease of 1.10pct.
Financial rates and management rates declined year on year, sales rates remained flat year on year, and R&D rates increased year on year.
Let's take a look specifically:
(1) The sales rate was 4.07%, the same as the previous year. (2) The management fee rate was 2.91%, a year-on-year decrease of 1.36pct.
(3) The R&D rate was 4.73%, an increase of 0.51 pct over the previous year. (4) The financial rate was -0.83%, a year-on-year decrease of 0.25pct.
Revenue for the first quarter of 2024 increased 4.47% year over year, and net profit to mother increased 52.69% year over year. In the first quarter of 2024, the company achieved revenue of 2,044 billion yuan, up 4.47% year on year; comprehensive gross profit margin of 25.22%, up 4.45 pct year on year; net profit to mother 230 million yuan, up 52.69% year on year. We believe that the net profit growth rate higher than the revenue growth rate is mainly due to the 4.45 pct increase in gross margin over the same period last year, etc.
Rates increased year over year during the first quarter of 2024. In the first quarter of 2024, the company's rate for the period was 10.41%, an increase of 1.02pct year-on-year. Sales rates and R&D rates increased year-on-year, while management rates and financial rates decreased year-on-year.
Let's take a look specifically:
(1) The sales rate was 4.28%, a year-on-year increase of 0.27pct. (2) The management fee rate was 3.21%, a year-on-year decrease of 0.08pct.
(3) The R&D rate was 3.57%, an increase of 0.92pct over the previous year. (4) The financial rate was -0.66%, a year-on-year decrease of 0.09pct.
UHV construction continues to advance, and the company is expected to benefit deeply. In recent years, in the context of the steady progress of large-scale landscape base project construction and grid-connection work, UHV and supporting main network construction has continued to accelerate in order to serve the construction of large-scale wind power photovoltaic bases in the desert, Gobi, and desert, and to support and promote intensive development and long-distance delivery of large-scale power bases, based on the plans of the National Energy Administration and the State Grid. In 2023, the company confirmed 7 1000kV GIS for the Rongcheng substation expansion project and 50-interval 750kV GIS for the Hongqi (Tanggemu) substation construction project. The high voltage sector achieved revenue of 6.155 billion yuan, an increase of 23.67% over the previous year.
The company has the world's leading ultra-high voltage technology, a complete industrial chain of switching equipment and an advanced scientific and technological research and development system, and has core competitiveness. We believe that the UHV construction will clearly drive the company's 1000kVGIS confirmation interval to continue to grow rapidly, and drive the company's overall performance to continue to grow rapidly.
The flexible, intelligent and digital transformation of distribution networks is expected to drive the rapid development of the company's distribution network business. In 2023, the company's distribution network sector achieved revenue of 2,909 billion yuan, continued to improve quality and efficiency, and gross margin increased by 5.26 pcts over the same period last year.
In order to promote the high-quality development of distribution grids under the new situation and help build a clean, low-carbon, cost-effective, efficient, supply-demand collaboration, flexible and intelligent new power system, in February 2024, the National Development and Reform Commission and the National Energy Administration issued the “Guiding Opinions on the High-Quality Development of Distribution Grids under the New Situation”, proposing to build a safe, efficient, clean, low-carbon, flexible, and intelligent new power distribution system. By 2025, the distribution grid structure will be stronger and clearer, power supply and distribution capacity will be reasonable and abundant, carrying capacity and flexibility will be significantly improved, and digital transformation will advance comprehensively. By 2030, the flexible, intelligent and digital transformation of distribution grids will basically be completed, effectively promoting the integrated development of distributed smart grids and large power grids.
We believe that as power grids continue to advance the construction of modern smart distribution grids, the company will continue to step up its efforts to develop the distribution grid market, sink the “one province, one policy” into the local market, and deepen the deep integration and smart upgrading of primary and secondary equipment, which is expected to drive the rapid development of the distribution network business.
The global power grid construction boom continues to rise, and the profitability of overseas business has increased dramatically. In 2023, the company's overseas revenue was 724 million yuan, up 261.10% year-on-year.
Profitability increased dramatically, with a gross profit margin of 9.15%, an increase of 129.61 pct over the previous year.
According to the company's 2023 annual report, quoting the International Energy Agency, the annual investment in global power grids will reach more than 600 billion US dollars, and the EU plans to invest 584 billion euros in grid upgrading by 2030. We believe that the global power grid construction boom is expected to continue to increase. The company will rely on overseas market platforms to give full play to the advantages of environmentally friendly products, deepen the high-end European market, expand the export business of stand-alone equipment, and promote healthy growth in the international market.
Profit forecasting and valuation. We estimate that the company's net profit for 2024-2026 will be 1200 billion yuan, 1,527 billion yuan, and 1.911 billion yuan. The corresponding EPS is 0.88 yuan, 1.13 yuan, and 1.41 yuan respectively. Referring to the company's position in the industry, UHV accelerated the company's performance and comparable company valuations, and gave the company a 2024 PE25-30X, corresponding to a reasonable price range of 22 yuan to 26.4 yuan. Maintain an “better than the market” rating.
Risk warning. Grid investment falls short of expectations; UHV construction progress falls short of expectations; market competition increases risks.