Key points of investment
The multi-point layout of source network load storage forms a dual business line of technical services+intelligent equipment. The company focuses on two major technical services and three intelligent equipment businesses. Among them, technical services include energy storage system technical services, testing and commissioning services. Smart devices include intelligent power distribution equipment, intelligent monitoring equipment, robots and drones. In 2021-2023, the company's revenue was 13.85 billion yuan, 17.90 billion yuan, and the 3-year CAGR for 2020-2023 was 31.55%; in 2021-2023, the company's net profit to mother was 1.43, 2.06, and 281 million yuan, respectively, and the 3-year CAGR for 2020-2023 was 47.81%.
Energy storage system technology service business: Backed by China Southern Power Grid, the domestic source grid side energy storage profit model continues to improve. 2024 is an inflection point for domestic energy storage construction. According to CNESA forecasts, the new installed capacity is expected to reach 41.2 GW/94.76 GWh in 2024, an increase of 91.6%/103.3% year over year. The company has strong technical strength. It has developed its own battery system and energy storage EMS, and has taken the lead in establishing the National Energy Storage Research Institute. It has been approved as the only national and local government to jointly build a new energy storage innovation center. Currently, the total filing scale of the innovation center demonstration project exceeds 1.3 GW/2.3 GWh, and it is expected that in-depth cooperation will be carried out in the future. The company relies on China Southern Power Grid and has a resource advantage. By the end of 2023, the company's energy storage business had orders exceeding 800 million yuan, and the company's energy storage business is expected to expand rapidly in the future.
Test, testing and commissioning service business: High technical barriers. Expanding coverage within the South Grid region, the company also has advanced power and power grid commissioning qualifications. In 2023, it acquired Guangxi Guineng and Guizhou Chuangxing to expand markets outside the province. The technical barriers to the testing and testing business are high, and the company's gross margin of this business has always remained around 40%. The downstream application field of the test and inspection business is in a boom cycle. Seabreeze construction in 2024 has made substantial progress one after another, thereby driving market demand for offshore wind power testing and commissioning. The company has built a grid-connected test platform for 16MW/20MVA wind turbines, which is expected to benefit from the rapid development of ocean winds in the future. The company launched the traditional coal and electricity flexibility transformation business, and the market scope expanded beyond the South Grid region. In the field of power grid and user-side testing and inspection, the company has continuously expanded the scope of China Southern Power Grid's regional quality control and inspection business, and the market share of the quality control and inspection business has increased.
Smart equipment business: Empowered by digital intelligent power grid construction, low-altitude drone inspection systems lead the industry 1) Intelligent power distribution equipment: Independently developed the Silk Road “iNOS” operating system to achieve a domestic replacement for intelligent power distribution terminal operating systems. Currently, next-generation measurement equipment based on the “Silk Road” system has formed the South Network standard. The company is actively exploring the non-shareholder market, and its market share is steadily increasing. 2) Intelligent monitoring equipment: Continuing to lead the Guangdong market, achieving zero breakthroughs in China's online sea and Shandong China nuclear; 3) Robots and drones: The company's “discerning” unmanned inspection technology industry lead, fully supporting the South Grid transmission, transformation and distribution joint inspection demonstration projects. It first obtained pilot permits from the State Grid Jiangsu and Hubei in 2023, and built the largest low-altitude inspection system in the domestic power and energy sector.
Profit forecasting and valuation
First coverage, giving a “buy” rating. The company's new energy storage business is expected to be rapidly deployed, the test, testing and commissioning business will achieve breakthroughs across regions, and the downstream application field is booming. Smart devices are expected to benefit from the acceleration of demand for digital and intelligent power grids. We expect the company's net profit to be 4.45, 601, and 777 million yuan respectively for 2024-2026, corresponding EPS of 0.79, 1.06, and 1.38 yuan, respectively, and corresponding PE of 36, 27, and 21 times, respectively. The average PE of comparable companies in 2024 was 44 times. We gave the company an average PE of 44 times the industry average in 2024, corresponding to a target market value of 19.5 billion yuan. The current market value has room to rise by 20.49%, giving it a “buy” rating.
Risk warning: Demand in the energy storage industry falls short of expectations, industry competition intensifies, grid investment falls short of expectations, etc.