A leading company in new energy electrical equipment. 80% of its revenue in 23 years came from the new energy sector. (1) The revenue of the photovoltaic/wind power/ energy storage industry line in 2023 was 2.074/1.376/0.668 billion yuan respectively, +83%/+22%/+237%. Among them, PV revenue increased from 35% to 42%, energy storage revenue increased from 6% to 13%, and wind power fell from 35% to 28%. By product, box-type substation/switchgear/transformer revenue was 3.458/0.509/0.688 billion yuan, compared to +75.30%/-24.09%/+54.64%, and gross margin was 21.51%/18.85%/28.23%, respectively, +2.73pct/-1.31pct/-0.89pct. (2) In 2023, the company's revenue was 4.948 billion yuan, +52.91% year on year; net profit to mother was 0.498 billion yuan, +87.92% year over year. The main reason was that the company strengthened its control over the supply chain and compounded the cost advantages brought by its own technological progress. The gross margin of the new energy sector increased by 1.52% to 22.73% year on year. 24Q1's revenue was 1.034 billion yuan, +46.35% YoY; net profit to mother was 0.09 billion yuan, +104.30% YoY.

The global power transmission and distribution equipment market is expected to reach USD 44.54 billion by 2030, with a CAGR of 4.4% (2024-2030). (1) Market space. According to QY Research, box-type substations: global box-type substation market sales are expected to grow from 43.5 billion yuan to 59.6 billion yuan in 2030, with a CAGR of 4.5%; low/medium voltage switchgear: the global low voltage & medium voltage switchgear market size will grow from 57.71 billion US dollars in 2023 to 71.8 billion US dollars in 2030, with a CAGR of 3.1%; transformers: Global transformer market sales are expected to grow from 2023 $23.54 billion grew to $30.65 billion in 2030, with a CAGR of 3.9%. (2) The competitive landscape. According to QY Research, core manufacturers of box-type substations around the world mainly include Mingyang Electric, Hitachi, Schneider, Siemens, and TBEA. The company belongs to the first tier. Based on expansion into new infrastructure (network side, data center) in the field of new energy, there is room for further increase in share.

Expanding to network-side business based on the new energy business will benefit from the opening of overseas direct sales channels and the increase in the sea breeze business. (1) Expansion to smart grids and data centers. The company has established long-term cooperative relationships with well-known enterprises such as the “Five Big Six Small” power generation groups, two major power grids (China Power Grid, China Southern Power Grid), two major EPC units (China Power Construction, China Energy Construction), communication operators (China Mobile, China Unicom), and energy solution service providers (Sunshine Power, Mingyang Intelligence, Shangneng Co., Ltd., and Hewang Electric). (2) Overseas: Establish two-wheel drive with indirect overseas going+global layout. Overseas demand for electrical equipment is rising, and the supply of transformers and other products is in short supply.

The company has continuously received orders for overseas switchgear, transformers, photovoltaics, energy storage, etc., and exports products all over Southeast Asia, Europe, the Middle East and North America. (3) Follow the sea wind and sea light fields to higher voltage levels. The company's high-capacity offshore wind power step-up transformers and inflatable medium voltage ring network cabinets have broken the monopoly of foreign brands and obtained batch orders. The company has developed a 66kV prefabricated intelligent offshore boosting system and 72.5kV environmentally friendly gas-insulated switchgear, which is suitable for 8-12MW fans, and the pooled side boost is raised from 35kV to 66kV. High-voltage main transformer products such as 110/220 kV, and GIS with a voltage rating of 110 kV have also been shipped in small quantities, and GIS with a voltage rating of 252 kV has also begun to be put on the market. Expanding to high-voltage, high-capacity products will help the company increase its profitability.

Profit forecast and valuation suggestions: The company's net profit due to mother is estimated to be 0.627 billion yuan and 0.822 billion yuan respectively in 2024/25, corresponding to EPS of 2.01 and 2.63 yuan/share. Considering the company's potential to develop the “two seas” market, referring to comparable company valuations, the company was given 18-22X PE in 2024. The reasonable value range was 36.18-44.22 yuan, giving it a “superior to the market” rating.

Risk warning: Overseas progress falls short of expectations, the growth rate of new energy sources is slowing down, competition is intensifying, raw material prices are rising, etc.