Company Overview: A leading transmission and distribution enterprise with complete coverage of primary and secondary equipment. The company was established in 93 to actively explore overseas markets. Currently, it has R&D and manufacturing capabilities for primary and secondary power systems, power electronic equipment, etc.

In addition to domestic business, the company's export business has spread to more than 100 countries and regions, mainly including Latin America, Africa, Central Asia, the Middle East, Europe, Southeast Asia and other regions. Overseas annual order amounts in 2019-2023 reached 16.0/15.0/2.25/2.99/4.01 billion yuan respectively, yoy +18.0%/-6.3%/+50.0%/33.0%/34.0%. The company's overseas orders continued to grow rapidly except in 2021.

At the performance level, thanks to the continuous growth of the switch business revenue and the rapid growth rate of overseas markets, the company's 2020-2024H1 revenue was 73.73/86.95/10.537/12.46/6.166 billion yuan, yoy +15.6%/17.9%/21.2%/18.2%/16.3%, and net profit to mother was 9.33/11.98/1.22/1.559/0.887 billion yuan, yoy +67.4%/28.3% /1.9, respectively %/ 27.7%/26.6%

Main business: In addition to products such as combination electrical appliances and isolators, the main products of the business developed to Supercapacitor include combined electrical appliances (including 500KV GIS products, continuous development of 800 and 1000KV GIS products), isolation switches (suitable for 750 kV and below lines), coil products such as circuit breakers, transformers & reactors, etc., and reactive power compensation products such as SVG. In recent years, the company's share in State Grid tenders showed an upward trend.

Since 2018, the company has been deployed in the field of supercapacitors, promoting its application in the fields of new energy vehicles and industrial automation. It has entered well-known European and American car companies such as GM/Audi/Benz/Volvo/Stellantis and domestic car companies such as GKrypton/Lotus/Geely/Chery/GAC/Great Wall/SAIC/Jidu to research next-generation EV architecture power components and target multiple platform products.

Downstream level: Accelerated investment in domestic UHV and overseas power grids is expected to drive up industry demand1. Domestic market: We expect to enter the peak operation period of UHV projects in 24-25. In order to improve the transmission capacity of important channels and key sections, it is expected that the transmission and receiving end high-voltage/ultra-high voltage substations will grow accordingly, which in turn will drive the company's revenue growth for transmission and distribution products.

2. Overseas markets: Major global economies are speeding up the pace of grid investment. Multinational grid interconnection is one of the important trends in future grid development. Currently, many regions around the world have proposed relevant plans. We expect that the relevant plans will advance or will continue to drive investment growth in related power equipment.

Profit Forecast and Valuation:

We are optimistic that in the future, the company will benefit from the global transformation of new energy sources, leading to an increase in investment in transmission and distribution, driving an increase in demand for related power equipment; at the same time, the company's own market share is expected to continue to grow, and UHV products are expected to achieve breakthroughs and increases. We expect the company's 24-26 revenue to reach 156.02, 190.97, 22.784 billion yuan, yoy +25.2%/22.4%/19.3%, net profit to mother 2.063, 2.52, and 3.072 billion yuan, and yoy +32.3%/22.2%/21.9%, respectively.

We selected Guodian Nanrui, Xuji Electric, Huaming Equipment, and Shenma Electric as comparable companies in the power equipment industry, which also have overseas business. According to WIND's consensus expectations, the comparable company's average PE is 24.7X in 2024. We gave the company a 24-year valuation of 24.7X, with a target price of 65.74 yuan for the first time, and gave it a “holding” rating.

Risk warning: policy risk; market risk; exchange rate risk; overseas subsidiary management risk; overseas EPC project risk; the estimates in this article are subjective and are for reference only.