Core views
Jinpan Technology's main business includes transformer series, power transmission and distribution, energy storage series, and overall digital solutions. According to the company's official website and 2023 annual report, Jinpan Technology was founded in 1997, headquartered in Hainan, and listed in 2021. In 2023, the company's revenue was 6.67 billion yuan, +41% year-on-year, and net profit to mother was 500 million yuan, +78% year-on-year. In terms of revenue by business, the transformer series is 4.09 billion yuan, accounting for 61%, the complete series is 1.77 billion yuan, accounting for 27%, the energy storage series is 410 million yuan, accounting for 6%, and the overall digital solution is 70 million yuan, accounting for 1%.
Transformers: The foundation on which the company stands, and the boom is expected to improve. According to the company's official website and 2023 annual report, the company is deeply involved in the transmission and distribution business with transformers as the core. The company has accumulated technology in the field of dry-type transformers for decades. Currently, dry-type transformers of 72.5KV and below can be provided, and the company's oil-immersed transformers have also achieved remarkable results in the field of wind power. After decades of hard work, the company has established long-term stable cooperative relationships with well-known companies such as General Electric, Siemens, Vestas, and Toshiba Mitsubishi Electric. In 2023, the company's transformer sales volume was 43.19 million KVA, +15% year-on-year. Since the beginning of the year, the transformer boom has been high. According to the General Administration of Customs, transformer exports from January to April 2024 amounted to 12.39 billion yuan, +28% over the same period last year. According to Mordor Intelligence, the transformer market is expected to reach $28.27 billion in 2024, with a CAGR of 9.7% in 2024-2029.
Energy storage: The company is developing rapidly, benefiting from the industry's strong trend. According to the company's 2023 annual report, the company's energy storage business is developing strongly. By improving the R&D system and increasing investment, it has built a full application scenario system on the power generation side, power grid side, and user side. The company focuses on energy storage tenders, etc., and undertook new energy storage orders of about 640 million yuan (excluding tax) in 2023, +145% over the same period last year. According to Trendforce, it is estimated that Asia will add 78.2 GWh of installed capacity in 2024, +47% year over year, 48.9 GWh in America, +30% year over year, 30.5 GWh in Europe, +53% year over year, and 9.6 GWh in the Middle East and Africa, or +62% year over year.
The industry is booming, and overseas expansion is smooth. According to the company's 2023 annual report, the company has always adhered to a global strategy and built an overseas sales network by 2023, with products and services spread across 86 countries and regions. Export revenue in 2023 was 1.18 billion yuan, +80% year-on-year, increasing from 14% in 2022 to 18% in 2023. In 2023, export orders were about 2 billion yuan, +119% year-on-year.
Production and sales rates remain high, and orders are growing rapidly. According to the company's prospectus and corresponding annual report, the company's production and sales rate has remained high for the past five years. The transformer production and sales rate in 2019-2023 was 102%/96%/92%/98%/87%, respectively. According to the company's 2023 annual report, transformer production in 2023 was 49.84 million KVA, +30% year-on-year, and 43.19 million KVA sales, +15% year-on-year. In 2023, the Group's overall orders were approximately 7.8 billion yuan (excluding tax), +35% compared to the same period last year.
Investment advice
We are optimistic about the future medium- to long-term development of Jinpan Technology. The logic is 1) the current new energy consumption problems may be solved through grid construction and energy storage configuration; 2) the company's transformer and energy storage business will directly benefit from industry development; 3) the company upholds a global strategy and develops overseas business rapidly. We expect Jinpan Technology's revenue for 2024-2026 to be 90/119/14.4 billion yuan, respectively, and net profit to mother will be 7.8/11.0/14.1 billion yuan, respectively. According to the latest closing price, the corresponding PE is 36/25/20 times, respectively, giving the company a “buy” rating for the first time.
Risk warning
Downstream demand falls short of expectations, increased risk of industry competition, risk of rapid price increases for upstream raw materials, risk of company management and operation risk, and risk of overseas business progress falling short of expectations.