The MRO base for power grids is stable, benefiting from high growth in grid investment. In 2023, the electricity consumption of the whole society was 9224.1 billion kilowatt-hours, +6.7% over the same period last year. Demand for electricity continues to be strong, and the overall power industry is developing rapidly. In 2024, the total investment in the construction of the national grid is expected to exceed 600 billion yuan. The company's revenue mainly comes from Guonan Network MRO procurement. The company's power industry business achieved revenue of 1.764 billion yuan in 2023, accounting for more than 60%, or +32.51% over the same period last year. The company's grid MRO bid share ranking is in the first tier, and it has formed a leading position in the power grid system. The company's business is mainly used in power transmission and distribution. The customer base is relatively concentrated in large state-owned enterprises such as the State Grid, and general-purpose tools and equipment are less affected by the power grid investment structure. The superposition grid investment amount is growing steadily. It is expected that the basic market will remain steady and will fully benefit from the increase in grid capital expenditure. The company will continue to pay attention to the development of the power business and increase the first-level e-commerce bid rate.

The “Four Legions” + new e-commerce jointly drive high revenue growth. The company actively lays out new industry development, flexes the power grid business success model, takes the lead in achieving performance breakthroughs in the nuclear power and petrochemical fields, and has a position advantage. In 2023, the company continued to promote the expansion of four strategic industries, including oil and gas, nuclear industry, transportation, and government emergency. Annual sales volume was about 0.634 billion, an increase of about 61% over the previous year in 2022. In addition, the intensive procurement of China's central enterprises has accelerated, and the company has grasped long-term growth points and consolidated the three basic tasks of team, supply chain and digital construction. In 2023, it bid for e-commerce procurement platforms of more than 40 national central enterprises, including China Huadian, China Finance, and China Power Construction, achieving sales revenue of about 0.198 billion yuan, which is about +295% year-on-year compared to 2022.

Build an “MRO intensive supplier” and build the company's core competitiveness. The trend of intensive procurement in the MRO industry will remain stable for the next 20 years, and China's manufacturing volume is expected to support the emergence of very large MRO concentrators. On the supply chain side, e-commerce has become a new trend in MRO intensive procurement, which can save enterprises 15-20% of costs, 70% of time, and 50% of manpower. The core model of the company's development is “intensive supply+service+independent products”, which accurately matches product usage and service needs, and uses R&D and production capabilities to intensively provide customers with products and technical services that accurately match their needs.

Equity incentives have been implemented, and dividends account for more than 60% year after year. Since the company went public in July 2021, the annual cash dividend ratio has been above 60%. In total, 4 dividends have been paid, and the cumulative cash dividend is about 0.505 billion yuan.

Profit forecast: The company's net profit for 2024-2026 is expected to be 0.242/0.299/0.392 billion yuan, respectively, and the corresponding PE is 17/14/10 times, respectively, covered for the first time, giving a “buy” rating.

Risk warning: New business development falls short of expectations, profit forecasts and valuation judgments fall short of expectations