Core views

The company released the 2024 semi-annual performance report. 2024H1 revenue reached 6.17 billion yuan, up 16.3% year on year; net profit to mother was 0.887 billion yuan, up 26.6% year on year. The first half of the year's performance maintained steady growth; cash flow from operating activities was 0.108 billion yuan, an increase of 0.122 billion yuan. In the short term, in-network business is expected to be stable, and demand is more balanced, in line with expectations throughout the year; off-grid new energy and industrial markets are affected by many factors; and overseas market demand is strong. The company's revenue growth target for 2024 is 20%. Judging from orders, the company added 16.513 billion yuan of new contract orders (excluding tax) in 2023, an increase of 36.2% over the previous year. The company has plenty of orders in hand, and is expected to steadily fulfill its annual business target. Against the backdrop of booming power grid construction at home and abroad, demand for power equipment within the grid and overseas will maintain a good level of demand.

occurrences

The company released the 2024 semi-annual performance report. It is expected to achieve operating income of 6.17 billion yuan in the first half of 2024, up 16.3% year on year, net profit of 0.887 billion yuan, up 26.6% year on year; net profit after deducting non-return to mother of 0.818 billion yuan, an increase of 20.1% year on year; and cash flow from operating activities of 0.108 billion yuan, an increase of 0.122 billion yuan.

Brief review

Steady growth in 2024H1 performance

1) Net profit attributable to mother and net profit net income not attributable to mother for the first half of 2024 were 0.887/0.818 billion yuan respectively, an increase of 26.6%/20.1% year-on-year, and a steady increase. Cash flow from operating activities was 0.108 billion yuan, an increase of 0.122 billion yuan, a significant increase.

2) In the second quarter, revenue of 3.508 billion yuan was achieved, up 12.0% year on year and 32.0% month on month; net profit to mother was 0.524 billion yuan, up 8.7% year on year and 44.4% month on month.

The company has plenty of orders in hand, and is expected to steadily fulfill its annual business goals 1) In the short term: ① The online business is relatively stable, and demand is more balanced compared to last year, which is in line with expectations throughout the year; ② the off-grid new energy and industrial markets are affected by many factors, and uncertainty is reflected; ③ Demand in overseas markets is strong, which is basically in line with expectations.

2) In 2023, the company added 16.513 billion yuan in contract orders (excluding tax), an increase of 36.22% year-on-year, with impressive performance. Overseas markets added 4.01 billion new orders, up 34% year on year, and domestic and overseas demand is improving.

3) The company's business target for 2024 is expected to achieve operating income of 15 billion yuan, an increase of 20% over the previous year; the target for new contract orders is 20.6 billion yuan (excluding tax), an increase of 25% over the previous year. Therefore, we expect the company to maintain steady growth in 2024.

Power grid construction is booming, and the company's share of winning bids is high

1) Grid investment is expected to continue to be booming in 2024, with main grid equipment accounting for an important proportion. From January to May 2024, the total investment amount for power grid projects was 170.3 billion yuan, a cumulative year-on-year increase of 21.6%. 2) In the first three batches of power transmission and transformation procurement projects at the State Grid headquarters in 2024, the total purchase amount of power transmission and transformation equipment was about 43.3 billion yuan, an increase of about 7.6% over the previous year. Among them, the total procurement amount of modular appliances was about 10.5 billion yuan, an increase of 19% over the previous year, and the company ranked among the highest in the bid amount for modular appliances and other products. The popularity of power grid construction is high, providing the company with a foundation for steady growth.

Demand is strong in overseas markets, and the future can be expected to be deep-seated

1) Strong demand in overseas markets. From January to May 2024, the export scale of primary equipment continued to grow. The cumulative export scale of transformers was about 16.6 billion yuan, a year-on-year growth rate of 27.4%; the cumulative export scale of high-voltage switches was about 11.3 billion yuan, a year-on-year growth rate of 30.7%. Since 2024, the export scale of primary equipment has continued to grow well.

2) The company mainly sells switches, transformers, and transformer products overseas. There are five major regions: Latin America, Middle East Europe, Russian-speaking, African, and Southeast Asia.

3) Overseas markets are booming: In 2023, China's transformer exports reached 37.3 billion yuan, a year-on-year growth rate of 26.3%, and exports of high-voltage switches reached 23.3 billion yuan, a year-on-year growth rate of 33.7%. Strong overseas demand is due to the increase in overseas demand for new energy and power grid construction. The company has been deeply involved in overseas markets for many years. It has strong brand power and high product strength. While overseas demand is growing, the company's overseas business can be expected in the future.

Performance forecasts

The company's net profit for 2024 and 2025 is estimated at 2.03/2.56 billion yuan, PE 23.5/18.6x.

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.