Leading power equipment companies rely on product, market layout advantages and first-mover advantages, bringing obvious excess profitability. They are more in line with the current round of domestic and foreign resonance power system construction cycles, and are steady compared to the overall growth performance of the industry.
The Zhitong Finance App learned that CITIC Securities released a research report saying that the 2024H1 electrical equipment industry is growing steadily and profit performance is under pressure, but while 2024Q2 profits improved seasonally, the year-on-year decline narrowed; the industry's expense ratio increased significantly, further suppressing profit performance. Among them, power equipment is driven by the current round of power system construction cycles that resonate at home and abroad, leading equipment companies give full play to their product, market layout advantages and first-mover advantages, resulting in obvious excess profitability. They lead the industry in revenue and performance growth, and are more deeply in line with the current round of domestic and foreign resonance power system construction cycles. Compared with the overall growth performance of the industry, the overall growth performance of the industry is steady. It is recommended to focus on the steady growth of power equipment leaders that balance the dual attributes of “smooth and countercyclical”.
The overall revenue growth rate of the 2024H1 industry was steady, and profit declined year-on-year but narrowed.
The overall revenue scale of the 2024H1 industry was 416.811 billion yuan, up 5.37% year on year; the 2024Q2 single quarter revenue scale was 231.05 billion yuan, up 6.92% year on year, up 24.38% month on month. The overall net profit scale of the 2024H1 industry was 26.879 billion yuan, down 17.93% from the previous year; the net profit scale for the 2024Q2 single quarter was 15.638 billion yuan, down 10.24% year on year. Overall, industry revenue has remained stable. Although downstream demand in the manufacturing industry is growing slowly, grid-side infrastructure spending has maintained a relatively rapid growth to offset it; from a profitability perspective, due to fluctuations in commodity prices, industry profits continued to grow negatively year on year, but the decline was reduced.
Expenses in the 2024H1 industry have increased significantly, further suppressing profit performance.
The overall cost scale of the 2024H1 industry was 54.085 billion yuan, up 14.6% year on year, up 1.77 pcts from the 2023 interim report; the overall cost rate for the industry was 12.98%, up 1.04 pcts from the 2023 interim report. 2024H1, the industry's R&D investment amount was 17.258 billion yuan, an increase of 14.5% over the previous year; the overall R&D investment of the industry accounted for 4.14% of revenue, an increase of 0.33 pct over the same period last year. The overall management expense ratio and sales expense ratio of the 2024H1 industry both increased slightly by 0.21pct compared to the same period last year. The overall financial expenses of the industry were 3.203 billion yuan, up 71.74% year on year. The overall financial expenses of the industry accounted for 0.77% of revenue, up 0.3 pct from the same period last year. CITIC Securities believes that the high exchange base was partly affected by the rapid depreciation of the RMB exchange rate during the same period last year. Overall, there has been a slight increase in industry costs, which also suppresses the overall profit performance of the industry to a certain extent.
The power equipment sector is booming, and the leading performance is leading the industry.
CITIC Securities selected companies with a market capitalization of 10 billion dollars as representatives of key leading enterprises in the power equipment industry. The above companies have profoundly benefited from the acceleration of domestic power grid investment and the major overseas power equipment renewal cycle. The 2024H1 performance lead industry: 2024H1 key companies' total revenue scale was 65.111 billion yuan, up 10.66% year on year, up 5.29 pcts compared to the overall growth rate of the industry; total net profit to mother was 7.884 billion yuan, up 17.95% year on year, an increase of 35.88pcts compared to the overall growth rate of the industry; the total net profit after deducting non-return mother was 7.619 billion yuan. The year-on-year increase was 19.63%, an increase of 32.98 pcts compared to the overall growth rate of the industry. Leading companies rely on product, market layout advantages and first-mover advantages to bring obvious excess profitability. They are more in line with the current round of power system construction cycles resonating at home and abroad, and are steady compared to the overall growth performance of the industry.
Risk Factors:
Investment in power grids fell short of expectations; competition in the industry intensified; prices of bulk raw materials fluctuated sharply; domestic and overseas electricity consumption growth fell short of expectations; and the development of new power systems fell short of expectations.
Investment Strategy:
In the context of the overall demand of the electrical equipment industry being affected by macroeconomics, CITIC Securities maintains a focus on the power equipment sector, which balances the transformation and upgrading of “pro-cyclical” energy systems and the acceleration of “countercyclical” major project construction; at the same time, it is recommended to focus on the investment opportunities of power equipment core leaders with obvious first-mover advantages in the fields of product richness and diversified market layout, mainly focusing on domestic UHV and flexible construction, domestic digital intelligence construction, and overseas multi-regional offshore equipment.