Company basic situation: All aspects of the new power system are being promoted together, and the company's performance has been growing steadily for many years. The company was founded in 1994. Its main business is transmission and transformation protection and automation systems, power generation and enterprise power systems, power distribution systems, and power electronics application systems. The company's revenue has grown steadily over the years, with CAGR +11.8% in the past four years: achieved revenue of 5.751 billion yuan, yoy +13.24% in 2023; 24Q1 achieved revenue of 1.545 billion yuan, yoy +31.21%, net profit of 0.181 billion yuan, yoy +27.55%, and revenue and profit growth accelerated.
Looking at the business spin-off, the company's revenue mainly consists of two major businesses: power grid automation, power plant and industrial automation. In '23, the company's power grid automation business achieved revenue of 2.924 billion yuan, accounting for 50.84% of revenue; power plant and industrial automation achieved revenue of 2.491 billion yuan, accounting for 43.31% of revenue.
Core highlights: Full coverage of source network load storage products, actively promoting overseas market development 1) Source: The traditional power generation field covers thermal power and power generation simulation solutions, and the field of new energy power generation covers hydropower, photovoltaics, wind power, etc. The products include power protection and automation systems. Looking ahead, the rapid growth of installed scenery is expected to drive the rapid growth of the company's primary and secondary equipment and power electronics (SVG) products on the new energy side.
2) Network: Application areas include transmission and transformation protection and automation systems, primary distribution equipment and automation. Looking forward to the future, we expect that domestic UHV and overseas multinational power grid interconnection plans will gradually advance, as well as the implementation of a new round of domestic distribution grid policies and the beginning of a new round of distribution grid investment growth cycle. The growth in the global power transmission, transformation and distribution network sector will drive up demand for the company's related products.
3) Netherlands: The company is actively expanding the electricity market. In '23, the company improved the power control system for the steel industry and won the bid for centralized control and scheduling projects in the petrochemical and iron and steel metallurgy industries. Under the trend of strengthening energy efficiency management on the electricity side and shifting to green and low-carbon, the company's electricity business will also usher in development opportunities in the future.
4) Storage: The company's first mass-produced energy storage battery PACK was successfully put into operation in 23. It has the ability to mass-produce battery PACs, and the energy storage business is expected to become the main driving force for the company's growth in the future.
5) Overseas market: The company's overseas business achieved revenue of 0.16 billion yuan, yoy +10.6% in 2012, won the bid for the Tabela hydropower project in Pakistan, and fully delivered the ADMS project in Nairobi, Kenya. In the future, the company will continue to take root in overseas markets such as Southeast Asia and Africa, strengthen overseas localization strategies, and enhance the localization market and service capabilities of international business.
Profit forecasting
We expect the company's 24-26 revenue to reach 6.97/8.43/10.134 billion yuan, yoy +21.2%/20.9%/20.2%, respectively; net profit of 7.33, 8.76, 1.02 billion yuan, yoy +16.85%/19.50%/16.28%, respectively. We selected Guodian Nanrui, Xu Ji Electric, and Dongfang Electronics, which have similar businesses in the field of power grid automation, as comparable companies. According to WIND's agreed expectations, the average PE valuation of comparable companies in 2024 was 25.0X. Considering that the company is expected to follow the acceleration of global investment in transmission, transformation and distribution networks in the future, we gave the company a 24-year valuation of 25.0X, with a target price of 22.01 yuan. It covered the first time, and gave it an “increase in wealth” rating.
Risk warning: Power grid investment falls short of expectations; market competition risk; technological innovation risk; raw material price fluctuation risk; overseas business operation risk; brain drain risk; transaction risk; the estimates in this article are subjective and are for reference only.