Core views

The company announced a pre-increase in 2024H1 results. Net profit attributable to mother reached 0.158-0.185 billion yuan, an increase of 75.10% to 105.02% over the previous year. It is expected that overseas market demand will continue to improve, increase revenue scale, and raise gross profit levels. The company's overall profitability is expected to improve, due to digitalization improving production efficiency, reducing costs due to large-scale effects, and increasing the share of high-margin businesses. Overseas demand continues to be strong, providing momentum for the company's future growth. The company is deeply involved in overseas markets, deeply binds leading international customers to go overseas, and actively promotes direct product exports and expands product types, so it will fully benefit from industry development opportunities brought about by high global demand.

occurrences

The company announced a pre-increase in 2024H1 performance. It is expected to achieve net profit of 0.158-0.185 billion yuan in the first half of 2024, an increase of 75.10% to 105.02% over the previous year, after deducting non-return net profit of 0.15-0.175 billion yuan, an increase of 76.91% to 106.40% over the previous year.

Among them, net profit attributable to mother was 0.1-0.127 billion yuan in the second quarter, up about 41%-79% year on year; net profit after deducting non-return to mother was 0.098-0.123 billion yuan, up about 44%-81% year on year.

Brief review

2024Q2's performance has increased, and the boom continues

1) The net profit of 2024Q2 is expected to be 0.1-0.127 billion yuan, an increase of about 41%-79% over the previous year. The growth rate is high, and the performance is impressive.

2) The overseas business is expected to contribute a significant increase. In 2023, the company's overseas revenue accounted for about 27%; overseas business contributed to revenue growth and raised gross profit levels.

It is expected that demand will improve and gross profit will jointly drive the company's high performance1) The forecast clearly indicates that 2024H1 orders have increased compared to the same period last year.

2) Accelerate global layout+effective market expansion. It is expected that the company's export business will continue to bring benefits, and core products will continue to expand the market, etc.

3) Increased profitability: It is expected that 2024H1 gross margin will rise year-on-year due to ① digitalization improving production efficiency and promoting cost reduction and efficiency; ② reducing costs due to large-scale effects and improving cost control capabilities; ③ increasing the share of high-margin businesses; etc.

The new energy sector is booming, and after depreciation/expense calculation in 2023 1) The company's new energy business revenue in 2023 was 2.13 billion yuan, a year-on-year increase of 66.6%, which is the core increase of the company's business.

2) There are more deductibles, changes in fair value/equity incentive expenses in 2023.

① It is estimated that participating company Anhewei's long-term equity investment depreciated by 50 million yuan; ② fair value changes to compensate Dingshuo Tongbang 0.17 million yuan; ③ increase in equity incentive expenses by 0.2 billion yuan, etc., totaling about 87 million yuan. After recovering the effects of impairment, etc., the corresponding company's net profit for the whole year increased by more than 35% year-on-year; after deducting non-net profit, the growth rate of non-net profit could reach more than 50%.

3) It can be seen from this that the company's new energy business maintained a high growth trend, and after calculating depreciation/expenses, etc., it went into battle lightly.

The sea view is high, and overseas demand continues to be strong

1) Global new energy installations are growing rapidly, and overseas demand will continue to improve under the general trend of power grid upgrading and re-industrialization; we maintain a positive judgment on overseas equipment demand in 2024. According to statistics from the General Administration of Customs, the export scale of transformers continued to grow from January to May 2024. The cumulative export of power-related transformers exceeded 11 billion yuan, an increase of more than 50% over the previous year, continuing the trend of high growth.

2) Through research on public data from leading power equipment companies such as Hitachi and Eaton, the company's order growth rate has remained high for a long time, at around 15%/50%, respectively, and determined that the boom will continue for many years.

3) Overseas demand continues to improve, and the company will fully benefit as an export-oriented enterprise. The company has long been deeply involved in overseas markets, and is a scarce target that can be directly exported to Europe and America. The company accounts for a relatively high share of overseas markets in Europe and the US, so it will fully benefit from the positive changes brought about by strong demand in the European and American markets.

Issuing an equity incentive plan to demonstrate confidence in future development

1) Size: On April 30, 2024, the company announced the 2024 Stock Options and Restricted Stock Incentive Plan (draft). The number of stock options to be awarded is 2.7 million shares, accounting for 0.69% of the company's total share capital; the number of restricted shares is 4 million shares, accounting for about 1.02% of the total share capital, accounting for a total of 1.71% of the total share capital.

2) Assessment goal: One of the following conditions must be met 1) Revenue side: The 2024/2025/2026 revenue growth rate is not less than 25%/50%/80%, that is, the corresponding revenue is 45.4/54.5/6.53 billion yuan, and the 2024/2025/2026 revenue growth rate is 25%/20%/20%, respectively. 2) Performance side: Net profit after deducting non-recurring profit and loss in 2023 is the base, and the growth rate of non-net profit deducted in 2024/2025/2026 is not less than 30%/60%/90%, that is, the corresponding amount of deducted non-net profit is not less than 2.6/3.2/380 million yuan.

Performance forecasts

The estimated net profit for 2024 and 2025 is 0.4/0.52 billion yuan, PE 18.5/14.3x.

Risk analysis

1) Demand side: Changes in national infrastructure policies have led to power investment falling short of expectations; power grid investment falls short of expectations; demand for power equipment has declined due to a decline in the growth rate of installed new energy installations; the growth rate of electricity consumption in the whole society has declined; the bidding progress of the two networks falls short of expectations; the progress of UHV construction falls short of expectations.

2) Supply side: Prices of commodities such as copper resources and steel have risen; the supply of power and electronic devices is tight, and the progress of localization falls short of expectations.

3) Policy aspects: Support related to the new electricity market falls short of expectations; the progress of the electricity price mechanism is lower than expected; the progress of the electricity spot market falls short of expectations; and the difference between peak and valley prices of electricity falls short of expectations.

4) In terms of the international situation: the energy crisis has been mitigated more quickly, energy prices have fallen faster; barriers to international trade have deepened.

5) Market side: The competitive landscape has changed drastically; increased competition has caused the profitability of all aspects of power equipment to fall short of expectations; transportation and other costs have risen.

6) Technical aspects: The progress of technical cost reduction is lower than expected; technical reliability is difficult to further improve, etc.