Incident: The company announced results for the first quarter of 2023 and 2024. In 2023, the company achieved operating income of 1,213 billion yuan, a year-on-year decrease of 8.89%; realized net profit of 94 million yuan, a year-on-year decrease of 36.19%; and net profit after deduction of 11 million yuan, a year-on-year decrease of 78.45%. Q4 achieved revenue of 409 million yuan, a year-on-year increase of 0.25%, and net profit to mother of 121 million yuan, a year-on-year decrease of 8.08%. 24Q1 achieved revenue of 318 million yuan, a year-on-year increase of 11.32%, and realized net profit of 0.24 million yuan, a year-on-year decrease of 29.64%.
Revenue declined due to delays in the power plant equity transfer+equipment order signing process. Seizing new energy power plant construction opportunities to develop the equipment business, the 24Q1 manufacturing order recovery trend is beginning to show. The company's revenue and net profit declined in 2023. The main reasons for the decline in revenue were: (1) the company sold 51% of the shares in the Qitaihe Wanlong Wind Power Project and the Qitaihe Jiaxing Wind Power Project; (2) the 2023 order signing process for the intelligent assembly manufacturing sector was delayed. The decline in net profit was mainly due to an increase in asset impairment losses calculated as goodwill impairment and a decrease in gross profit from power generation in the comprehensive smart energy business. On March 1, 2024, the National Development and Reform Commission and the National Energy Administration issued the “Guiding Opinions on High-Quality Development of Distribution Grids under the New Situation”. Grid tenders are expected to continue the booming trend since the 14th Five-Year Plan. The company has more than 30 years of experience in the field of electrical manufacturing. In 2023, the company established a major customer sales department to establish good cooperation with central state-owned enterprises through the new energy business, actively seize equipment opportunities in the NEV construction process, expand the equipment sales market, and set up a R&D team in Yangzhou to further develop innovative products and equipment, and focus on the development of the manufacturing industry. In 24Q1, the company's manufacturing orders grew at a high year-on-year rate and achieved a good recovery.
By business, revenue from the integrated smart energy business increased markedly. In 2023, the company's intelligent assembly manufacturing/new energy power generation/new energy engineering/comprehensive smart energy business achieved revenue of 4.04/4.25/0.49/299 million yuan, respectively, -18.3%, -15.2%, -42.98%, and +107.7% compared with the same period last year. In addition to power plants independently developed and operated, the company adopted a strategy of “cooperative development” with central and state-owned enterprise partners. In the process of continuous investment and construction of new power plant assets, the company continuously optimizes the structure and quality of existing new energy assets, and selects opportunities to sell mature power plant projects. While controlling the size of the company's stock assets and increasing investment returns, the company maintains deep cooperation with central state-owned enterprise partners to obtain a win-win situation for new energy power plant projects. By the end of 2023, the company had developed, built, invested and operated more than 2,000 MW of renewable power plants, with a total feed-in capacity of 2,048 billion kilowatt-hours in 2023. In 2023, the company added approval for various wind power photovoltaic projects, such as the Jiuzhou Zero Carbon Industrial Park 49.5MW wind power project and the Anda Jiuzhou Volcano 250MW photovoltaic power generation project, and has prepared a number of high-quality new energy projects. The new energy power plant business was further consolidated.
The lower gross margin of integrated smart energy affects the overall gross profit margin. The company's comprehensive gross margin in 2023 was 29.83%, down 9.5pct year on year. Among them, the gross margins of intelligent assembly manufacturing/new energy power generation/new energy engineering/comprehensive smart energy business were 20.11%, 63.61%, 17.48%, and -7.87%, respectively, -1.44%, -3.5%, -3.54%, and +13.38% year-on-year. The low gross margin of the comprehensive smart energy business is mainly due to the biomass cogeneration projects it includes. Distributed wind power and independent energy storage power plant projects are still in the construction stage. It is expected that losses will be reduced and reversed in the future through refined operation management, fuel cost control, and increased non-electricity revenue. In 2023, the country will continue to push forward market-based electricity reforms and standardize renewable energy power generation projects, and the company is expected to fully benefit as a leading private new energy enterprise in Northeast China.
Investment advice and valuation: Based on the company's 2023 and 2024Q1 performance, we adjusted the profit forecast and added the 2026 forecast. The company is expected to achieve sales revenue of 1.37 billion yuan, 15.1 billion yuan, and 1.66 billion yuan respectively in 2024-2026, with growth rates of 12.9%, 10.1%, and 10.2% respectively. Net profit attributable to mother was 120 million yuan, 140 million yuan, and 170 million yuan respectively, with growth rates of 28.6%, 15.1%, and 19%, respectively. The corresponding PE is 32X, 28X, and 24X, respectively. Maintain an “overweight” investment rating.
Risk warning: Risk of policy advancement falling short of expectations, risk of investment mergers and acquisitions, risk of market competition, risk of project construction falling short of expectations.