Power distribution equipment is growing steadily, and new photovoltaic materials and energy storage businesses are developing strongly. Focusing on the power distribution equipment business represented by busbars, with photovoltaic welding belts as the main new photovoltaic materials business, with the network source side and user side as the three major energy storage system businesses, Weiteng Electric achieved operating income of 2.848 billion yuan, +74.0% year over year; realized net profit of 0.12 billion yuan, +72.3% year over year; realized net profit of 0.117 billion yuan, +76.9% year on year.

In Q1 '24, we achieved operating income of 0.795 billion yuan, +84.7% YoY; realized net profit to mother of 0.035 billion yuan, +165.6% YoY; realized deducted non-net profit of 0.033 billion yuan, +221.5% YoY.

Busbar: Benefiting from the trend of intelligence+new energy, channel expansion has achieved remarkable results. On the market side, power grid energy saving and emission reduction+performance requirements drive the bus market growth. The CAGR is expected to be 5.1% in 2022 to 2028. On the policy side, the accelerated growth of power grid capital expenditure and the deepening transformation of intelligent distribution networks have brought opportunities for the company's intelligent products. The peak load characteristics of power grid systems, the “double high” characteristics of a high proportion of renewable energy and a high proportion of power electronic equipment are becoming more and more prominent; the company's product safety recognition is high, and it is expected to benefit. On the company side, the bus product industry chain coverage is perfect, and domestic and foreign sales channels continue to expand.

Complete equipment+transformer: The business is growing rapidly, and it is expected to benefit greatly overseas. The 2024 layout is beginning to show results, and transformers and their accessories are expected to continue to grow rapidly in the next 2-3 years. On the market side, transformer production in the Chinese market grew by 5.1% in 2022, and distribution transformers are expected to dominate the market in the future; the medium and low voltage complete equipment industry is recovering and is expected to grow steadily after 2024. On the sales side, the company has become Westinghouse's deep partner overseas, and the two sides will jointly further expand the global new energy market.

Photovoltaic welding belt: industry boom is rising, and product demand continues to grow. Weiteng has been in the photovoltaic welding belt business for more than ten years and is one of the main suppliers of photovoltaic welding belts in China. The product matrix is rich, including SMBB welding belts, low temperature welding belts, MBB welding belts, conventional confluence belts, black welding belts, etc. The company has a forward-looking layout of 0BB welding belts. Currently, it has mass production capacity for fine-wire welding belts, which is expected to further increase the company's profits in the future. Welding belt shipments in 2022 doubled compared to 2021, achieving revenue of 0.544 billion yuan; in 2023, PV welding belt revenue was 1.062 billion yuan, an increase of 95% over the previous year. The company's new photovoltaic materials business is expected to grow further in the later stages.

Energy storage: Products keep pace with the times, and the market continues to be hot. The company's energy storage business is based on “full product line layout, full industry chain construction”. Currently, the product matrix is mainly network source-side energy storage, industrial and commercial energy storage, supplemented by user energy storage and portable energy storage, and strives to create a one-stop energy storage solution for customers. In 2023, the company's energy storage system business developed strongly, generating revenue of 0.351 billion yuan, an increase of 386.97% over the previous year. The company is also actively expanding the domestic market while establishing cooperative relationships with many companies to promote the development of energy storage business.

Profit forecast and valuation: The company's total revenue for 2024-2026 is expected to be 4.11/5.87/7.73 billion yuan, respectively, up 44%/43%/32%; net profit to mother is 0.19/0.27/0.35 billion yuan, respectively, up 59%/39%/33%.

Considering the company's leading bus business, the transformer, complete equipment, and energy storage business is expected to grow rapidly. Therefore, on the basis of the industry average, the company was given a PE valuation of 18 times in 24 years. The corresponding target price was 21.5 yuan, giving the first coverage a “buy” rating.

Risk warning: Risk of insufficient technological innovation, increased risk of market competition, risk of accounts receivable not being collected, risk of fluctuations in raw material prices, risk of measured subjective risk, etc., risk of stock price fluctuations.