The “little giant” of domestic transformers actively explores the global market. The company was founded in 1999. At the beginning of its establishment, its products were mainly transformers in the consumer and home appliance fields. Later, it entered the energy industry and expanded its products to photovoltaic boosters, box transformers, etc., and was listed on the Shenzhen Stock Exchange in 2017. In recent years, the company has actively deployed overseas markets and promoted the construction of production bases in Malaysia, Thailand, the United States, Mexico and other countries.

The company's 2020-2023 revenue & profit CAGR reached 37.2%/60.0%, and the performance grew rapidly.

Driven by “New Energy & Distribution Network & Data Center” collaboration, demand for power equipment is booming. 1) Photovoltaics:

Demand for new domestic photovoltaics exploded in 2023, with installed capacity +147%. Taking into account grid consumption capacity, we expect China/global 2023-2026 PV installed CAGR to be 10%/21%, and overseas PV growth will continue; 2) Distribution networks: US and European power distribution equipment investment is driven by multiple demands such as new energy, industrial backflow, and post-pandemic inventory replenishment, and is in a boom cycle; 3) Data centers: According to Cloudscene data, the number of data centers in the US will reach 2,793 in 2022 Seats are more than five times that of other countries, and the market size CAGR is expected to reach 8.2% in 2024-2030. In summary, photovoltaic step-up transformers and distribution transformers are in a booming phase, and the company is expected to benefit from overseas transformer industry trends and a high increase in revenue and profit.

Energy products are mainly oriented to overseas, deeply bind major customers, increase the proportion of overseas direct sales, and accelerate the layout of channels and production capacity. 1) The company's energy products have formed a “2+X” matrix, extending from high-frequency inductors in inverter components to photovoltaic boost transformers, smart box transformers, etc. Currently, the increase mainly depends on the photovoltaic boost change. 2) The company is deeply tied to major customers in the photovoltaic industry. It is a leading core supplier of inverters such as Sunshine Power and Huawei. The largest customer accounts for 43% of revenue in 2023. The high increase in overseas optical storage for core customers is expected to drive a high increase in the company's products going overseas, and the production capacity of the Ji'an & Anhui plants will be released at an accelerated pace to meet the needs of core customers. 3) Indirectly overseas, the company actively promotes the proportion of direct overseas sales (mainly in the US and Europe) and strengthens the layout of overseas marketing teams. Customers include photovoltaic inverters, EPC and power grid companies. At the same time, we are promoting overseas transformer production capacity such as the US, Mexico, and Thailand to avoid trade risks. We expect production capacity in North America to gradually be put into operation over 24-26, and production capacity at home and abroad is expected to reach 1:1 in the long term.

The basic board of lighting products is stable, and major customers are deeply bound. According to Statista data, the global LED lighting market revenue will grow from $124 billion in 2024 to $160 billion in 2026, with a CAGR of 7%. The company mainly produces lighting power supplies and lighting products. It has leading international performance, is deeply tied to major international customers such as IKEA, SUL, Kichler, and Philips, and is equipped with overseas production capacity such as Malaysia. Looking ahead to 2024, the lighting business is expected to increase steadily and maintain a stable basic market in the coming years to protect the energy business.

Profit forecasting and investment rating: The company is tied to leading photovoltaic companies, with a far-reaching overseas layout and plenty of room for growth. We expect the company's net profit to be 0.35/0.49/0.64 billion yuan in 2024-2026, respectively, +66%/+40%/+31% year-on-year, corresponding PE 21/15/11 times, respectively. Considering the company's strong ability to go overseas, the proportion of overseas direct sales is expected to increase rapidly. New products will gradually be released, 30 times PE will be given in 2024, with a target price of 26.5 yuan. For the first time, coverage will be given a “buy” rating.

Risk warning: Renewable energy installations fall short of expectations, overseas market expansion falls short of expectations, risk of exchange rate fluctuations, and increased competition.