Incident: The company announced results for the first quarter of 2023 and 2024. In 2023, the company achieved operating income of 1,347 million yuan, an increase of 6.69% over the previous year, and realized net profit of 41 million yuan, an increase of 34.87% over the previous year.
Q4 achieved revenue of 397 million yuan, a year-on-year decrease of 11.19%, and net profit to mother of 0.7 billion yuan, an increase of 124.23% over the previous year. 24Q1 achieved revenue of 112 million yuan, a year-on-year decrease of 37.53%, and realized net profit to mother of -0.1 billion yuan, a year-on-year decrease of 145.73%.
By business, sales of technical services have increased significantly, and gross margin has declined. In 2023, the system integration/design/technical service/software development business achieved revenue of 596/2.94/1.62/157 million yuan, respectively, -4.25%, -5.5%, +78.99%, and +58.18% year-on-year. In terms of gross margin, the comprehensive gross margin was 21.37%, -1.71 pct. The gross margins of the system integration/design/technical service/software development business were 11.07%, 34.03%, 23.3%, and 37.05%, respectively, +0.83%, -0.84%, -19.01%, and -9.39% compared to the same period last year.
The cost rate increased by 1 pct year-on-year during the period, and reserves for ongoing research projects were sufficient. In terms of operating efficiency, the company's expenses rate for the 2023 period was 18.99%, +1.01pct, and sales/management/R&D/finance expenses were 4.75%, 6.9%, 4.75%, and 2.58%, respectively, and -0.62pct, +0.38pct, +0.28pct. The company currently has sufficient reserves for research projects, covering various fields such as virtual power plants, smart cities, industrial Internet, etc., to help the company develop in the long term.
Electricity market reforms are advancing at an accelerated pace, and the importance of energy aggregators is highlighted. The “Guiding Opinions on Deepening Power System Reform and Accelerating the Construction of New Power Systems” issued in July 2023 emphasizes the need to scientifically and rationally design the construction path of new power systems, and to gradually reduce the proportion of traditional energy in steps on the basis of safe and reliable replacement of new energy sources. With the introduction of a higher proportion of new energy sources, the requirements for intelligent, flexible, safe and efficient power systems have further increased. The company is positioned as an energy aggregator, platform and technology provider and operator in the field of virtual power plants, and has sufficient experience in operating projects such as the Shenzhen Virtual Power Plant and the Northern Hebei Virtual Power Plant. In 2023, the company also undertook various projects such as the State Grid Hunan Electric Power's 2023 Smart Energy Integrated Service Platform New Power Load Management System Deepening Application Development and Implementation Project, and the State Grid Hunan Comprehensive Energy Company's 2023 Agile Iterative Development and Implementation Project for Emerging Businesses, continuously consolidating its digital energy business experience. As the construction of the new power system continues to advance, the company is expected to fully benefit.
Investment advice and valuation: Based on the company's 2023 and 2024Q1 performance, we adjusted the profit forecast and added a 2026 forecast. The company is expected to achieve sales revenue of 1,508 billion yuan, 1,659 billion yuan, and 1,803 billion yuan respectively in 2024-2026, with growth rates of 11.9%, 10%, and 8.7% respectively. Net profit attributable to mother was 57 million yuan, 82 million yuan, and 108 million yuan respectively, with growth rates of 38.3%, 43%, and 31.8%, respectively. Corresponding PE is 46X, 32X, and 24X respectively. Maintain an “overweight” investment rating.
Risk warning: Risk of policy advancement falling short of expectations, risk of R&D falling short of expectations, risk of market competition, risk of project construction falling short of expectations.