Key points of investment:
Revenue grew rapidly in the first quarter of 2024, and performance opened a rapid growth channel. In 2023, the company achieved revenue of 1,407 billion yuan, an increase of 21.90% over the previous year; net profit to mother was 161 million yuan, compared to -434 million yuan in the same period last year. In the first quarter of 2024, the company achieved operating income of 367 million yuan, an increase of 30.08% year on year; net profit to mother was 43 million yuan, an increase of 322.18% year on year.
Continuously improve the product line around the industrial Internet platform. The industrial Internet platform covers the edge layer, IaaS layer, platform layer (PaaS layer), application layer, and security protection throughout the above levels. The company mainly covers the three core layers of edge layer, platform layer, and application layer. Edge layer, the company's main products include distributed control systems (DCS), programmable logic controllers (PLC), robots, non-standard automation, electric actuators and sensors; platform layer, the company's main products and solutions include real-time databases, factory-level information control integrated platforms, etc.; application layer, the company's main products and solutions include smart power plants, smart metallurgy, smart chemicals, smart ports, Huilian manufacturing platforms, and various types of artificial intelligence industrial software, process packages, etc.
The downstream business potential of thermal power is being unleashed at an accelerated pace. In 2023, the company won dozens of large-scale thermal power generators, including Zhejiang Energy Liuheng, Guoxin Binhai, Guangdong Electric Power Dapu, Yunneng Tou Honghe, Zao Mine Hongdunjie, Panjiang Puding, Hubei Energy Ezhou, etc., as well as 9H combustion engine projects such as Shenzhen Energy East Power Plant and Mawan Power Plant. The company's autonomous and controllable DCS ranks among the highest in the industry in domestic large-scale unit control systems such as millions of units and 9H combustion engines. At the same time, it successfully undertook a power control system task, and the company supported the construction of major national projects with autonomous and controllable power to serve the overall national security situation. In addition, the company anchored the “double carbon” goal, undertook the first high-energy consumption and high-ratio new energy source network load storage and scheduling control project - the Tibet Zabuye Photothermal Source Grid Load Storage Microgrid Project, and has taken solid steps in the construction of “photothermal-electricity-storage” multi-energy complementarity and the construction of a new power microgrid.
Assist the country in major “two-plane” projects and build barriers to long-term competition. In 2023, the company and China Refueling and Southeast University jointly established the “Intelligent Gas Turbine Control System Collaborative Innovation Center” to jointly promote the R&D, promotion and application of intelligent control systems for domestic heavy gas turbines, and successfully delivered the first localized control system for China's autonomous heavy gas turbines to help the country's “two engines” major project, which is of great historical significance in promoting the localization of China's gas turbine control system. At the same time, the company's product development results have been fruitful. The technology of the EmpoworX industrial Internet platform has been upgraded; the capabilities of the four major low-code tools and microservice platforms have been improved; and ICS systems such as smart warning and intelligent monitoring incorporating artificial intelligence technology have successfully passed the certification of a national expert group.
Profit forecasts and investment recommendations. We believe that the company is deeply involved in control systems, continues to expand the product matrix around the industrial Internet, participate in major “two-machine” projects, achieve complete autonomy and control, and build strong technical barriers. Demand for downstream localization of thermal power is strong, which is expected to drive rapid growth in the company's performance. We expect the company's industrial automation and industrial Internet business to achieve a high revenue growth rate driven by thermal power and other downstream autonomous and controlled demand. Referring to 2023, the 24-26 revenue growth rates for the industrial automation business were 41%, 39%, and 37%, respectively; the 24-26 revenue growth rates for the industrial Internet business were 15%, 16%, and 17%, respectively.
The gross margin of each business has maintained a stable trend.
We estimate that the company's revenue for 2024-2026 will be 19.01/25.57/3.417 billion yuan, net profit to mother will be 268/3.56/ 467 million yuan, and EPS will be 1.12/1.48/1.95 yuan respectively, giving the 2024 dynamic PE 25-30 times, and a reasonable value range of 27.93-33.52 yuan for 6 months, giving the first coverage a “superior to the market” rating.
Risk warning. The company's business progress falls short of expectations, and industry policy risks.