Revenue and net profit remained high, slightly exceeding market expectations. Pinggao Electric released financial reports for 2023 and 2024Q1. In terms of revenue structure, the company achieved revenue of 11.077 billion yuan, a year-on-year increase of 19.44%; 2024Q1 achieved revenue of 11.077 billion yuan, of which 2023Q2 achieved net profit of 2,044 billion yuan, an increase of 4.47% over the previous year, and net profit of 230 million yuan, an increase of 52.69% over the previous year. The company's performance remained high and slightly exceeded market expectations; judging from the revenue structure, 2023 The annual high voltage sector accounted for 46.30% of revenue, a year-on-year decrease of 7.37 pct. The medium- and low-voltage distribution network segment accounted for 41.03% of revenue, an increase of 8.96 pcts over the previous year.
Gross profit margin increased steadily. The comprehensive gross margin in 2023 was 21.57%, up 3.79% from the same period last year. Among them, the gross margin of the high voltage section was 22.9%, down 1.51 pct year on year, the gross margin of the medium and low voltage distribution network section was 16.74%, an increase of 5.26 pct over the same period last year, the gross margin of the operation and maintenance service section was 29.77%, an increase of 3.96pct year on year, and the gross margin of the international business sector was 9.15%, which was a further increase. 2024Q1
The three rates were reduced by 0.86pct, increasing profits. The company's expenses for the 2023 period were 1,297 million yuan, up 11.32% year on year, less than the revenue growth rate. Sales expenses were 451 million yuan, up 20% year on year. The main reason was that the company increased market development, and management expenses were 322 million yuan, down 19% year on year. The main reason was that dismissal benefits due to the diversion and placement of surplus personnel decreased year on year, R&D expenses were 524 million yuan, an increase of 34% year on year. The three rates were 11.71%, down 0.86 pct year on year.
The popularity of UHV line construction continues to rise. In 2023, UHV started construction of “4 direct 2 AC”, which is a significant increase from “0 direct 4 AC” in 2022. The company's market share in the field of combined electrical appliances is far ahead. During the reporting period, it successfully developed high-end equipment such as the first international 550 kV high-speed circuit breaker, the first domestic ±800 kV DC high-speed switch, and realized engineering applications. The epoch-making international first 252 kV vacuum column circuit breaker has passed all type tests, and the leading position in the power grid market continues to be consolidated, and the number of new contracts signed increased by 44.20% over the same period last year. It is expected that UHV will continue to start construction of “4 straight and 2 interchanges” in 2024, and the electrical equipment market is expected to maintain strong demand.
Profit forecast and investment suggestions: Based on the company's 2023 order and 2024 power grid investment situation, we expect the company's revenue for 2024-2026 to be 131.5/154.6/17.99 billion yuan, respectively, and the corresponding net profit to mother is 11.74/14.09/1,666 billion yuan. Finally, according to the DCF model, we raised the target price from 15.65 yuan/share to 20.10 yuan/share to maintain the “better than market” rating.
Risk warning: 1. Approval and commencement of UHV lines fell short of expectations; 2. Gross margin dropped sharply due to fierce market competition; 3. Prices of raw materials rose sharply; 4. Exchange rate risk.