Excellent power supply and power component manufacturers continue to expand application fields around the “2+X” strategic layout. Igor was founded in 1999 and listed in 2017. It is headquartered in Foshan, China. The company focuses on R&D, production and sales of power supplies and power supply components for industrial and consumer use. The products can be widely used in photovoltaic power generation, industrial control and lighting. The company's main products cover energy, information, lighting, and incubation products. Major customers include leading domestic and international companies such as Yangguan Power, Ikea, Hitachi, Mingdensha, Osram, Bosch, Rockwell, Schneider, and Kichler.

Revenue and profit grew steadily. New energy products benefited from rapid PV growth, 24Q1 revenue growth was steady, gross margin performance was outstanding, and net profit to mother grew rapidly. The compound growth rate of the company's revenue in 2019-2023 was 29%, and the compound growth rate of net profit to mother was 38%. Energy products have benefited from the high growth of the photovoltaic energy storage industry, deepening the expansion of new customers from old customers, and rapid growth in product development (high frequency inductor -> photovoltaic boost conversion). The company's gross margin was on the upward channel in 21-23. 24Q1 revenue grew steadily, and gross margin performance was outstanding. 24Q1 achieved revenue of 774 million yuan, up 21.05% year on year, gross profit margin of 24.2%, yoy+7.05 pct, down 0.41 pct from month to month. The year-on-year increase in gross margin clearly led to high profit growth in the first quarter. 24Q1 achieved net profit to mother of 58 million yuan, an increase of 207% year on year.

The trend of power grid upgrading is clear, AI is driving a significant increase in electricity demand, and power infrastructure construction in North America and Mexico is expected to exceed expectations. Driven by grid digitalization and clean energy transformation, developed countries and China continue to increase their investment in power grids. AI is driving the acceleration of power infrastructure. AI brought about changes in the computing power structure, driving the upgrading of data centers from MW to GW. According to neutral estimates, the future Nvidia GPU-based AI data center power consumption will be 467.2 billion kWh, accounting for about 12% of the total electricity demand in the US in 2023, or 102% of the electricity demand for data centers, AI, and cryptocurrencies in 2022. According to the data center's electricity price of 0.07 US dollars/kWh, the annual electricity cost of AI data centers is about 32.7 billion US dollars, leading to a significant increase in data center power consumption and electricity costs. The US is the largest market for data centers. US data centers are concentrated on the east and west coasts, and are expected to move to the central region in the future. At the same time, along with new demands such as AI spawning electricity demand, future US power grid construction is expected to accelerate. 2023H2 North America has 5.3 gigawatts of new data center capacity under construction. The capacity under construction is nearly doubling, and power infrastructure construction is being accelerated. Mexico's tight electricity supply combined with near-shore outsourcing is driving demand growth, and Mexico's electricity infrastructure construction is expected to accelerate. According to the Mexican Energy Association, to meet growing demand, including from Mexican offshore companies, the government will need to invest $120 billion over the next 15 years to generate and distribute electricity.

The North American transformer market is booming, and the company is actively planning overseas production capacity and is expected to go overseas at an accelerated pace. Transformers play an important role in all aspects of power system generation, transmission, distribution, and energy conversion. Large-scale integration of renewable energy, increasing electrification plans in emerging economies, AI and other innovations are expected to drive the growth of the transformer market. GMI expects the global transformer market to be 58.8 billion US dollars in 2023, an increase of 9% over the previous year. The compound growth rate of the global transformer market is expected to be 7% in 2024-2032. Power infrastructure construction is driving the growth of the transformer market. Demand in the North American transformer market is strong, power-related business revenue and orders from overseas power equipment manufacturers are growing strongly, and Eaton Electric/WEG/Siemens has launched a transformer capacity expansion plan. China's transformer exports account for a low proportion of US transformer imports (5.23% in 2023). Against the backdrop of supply shortages, it is expected that domestic manufacturers will go overseas at an accelerated pace. The company is actively planning overseas production capacity construction in Mexico and Dallas, USA, and is expected to fully benefit from rising demand and domestic manufacturers going overseas.

Investment advice: The company is expected to achieve revenue of 49.3/68.4/9.43 billion yuan in 24/25/26, and achieve net profit of 3.5/50/ 650 million yuan, corresponding to 25.6X/17.7X PE in 24/25, with a “buy” rating for the first time.

Risk warning: risk of international operation, risk of increased market competition, risk of price fluctuations of major raw materials, geopolitical risk, risk of declining industry sentiment, subjective risk of estimates, risk of changes in transactions