The company announced 24Q3 results, which achieved revenue of 4.241 billion yuan (yoy +29.39%, qoq +20.87%); net profit of 0.604 billion yuan (yoy +34.95%, qoq +15.34%); net profit of 0.565 billion yuan after deducting non-return to mother (yoy +31.34%, qoq +13.01%). The company's performance in the third quarter increased, the share of overseas revenue continued to rise, and the amount of contract debt reached a new high. The company also announced that the holding subsidiary Jiangsu Siyuan High Voltage plans to invest 0.3 billion yuan in the “High Voltage Intelligent Integrated Electric Appliance (GIS) Production Base Construction Project” to meet the demand for increased production capacity. We are optimistic that the company will benefit from the boom in both the online and overseas markets. As a leading private power equipment enterprise, the company has strong alpha attributes and maintains a “buy” rating.

Results grew rapidly in the first three quarters, and gross margin increased year-on-year

The company 24Q1-3 achieved revenue of 10.407 billion yuan (yoy +21.28%), net profit due to mother of 1.491 billion yuan (yoy +29.88%), realized net profit deducted from mother of 1.405 billion yuan (yoy +26.52%), and ROE reached 13.47% (yoy+1.55pct). Benefiting from the increase in overseas revenue share and supply chain management optimization, the company's 24Q1-3 gross net margin increased year on year, and profitability continued to improve. The overall gross margin of 24Q1-3 reached 31.42%, +1.32pct year on year, and the net margin reached 14.60%, +0.76pct year on year.

In terms of cost ratio, the overall cost ratio of 24Q1-3 company was 14.5%/4.7%/2.5%/0.3%/7.1%, respectively, with a year-on-year change of +0.3/+0.3/-0.1/+0.4/-0.3 pct, which remained stable overall.

The Internet is booming overseas, and the amount of contract debt continues to rise month-on-month

Under domestic demand for new power system construction, the total investment scale of power grids is expected to grow steadily. We believe that the growth rate of power grid infrastructure investment is expected to reach more than 10% in 24, and the main distribution network is expected to jointly achieve high growth. Overseas, driven by new energy, industry, data centers, etc., investment in power grids is expected to accelerate, demand for power equipment will spill over, and the company's high-voltage grade products will be more sustainable when going overseas. The company's overseas revenue in the first half of the year was 1.515 billion yuan (yoy +40.04%), increasing its share to 24.56% (yoy+4.16pct), and overseas markets were developing smoothly. By the end of 24Q3, the company's contract debt reached 2.236 billion yuan, an increase of 0.301 billion yuan over 24Q2, and continued to increase month-on-month. We believe that the company's overall new orders will continue to increase rapidly, and the online and overseas markets will provide strong support for orders and performance throughout the year.

Profit forecasting and valuation

We maintained the company's net profit forecast for 2024-2026 at 2.023/2.597/3.201 billion yuan, respectively, with year-on-year growth rates of 29.77%/28.35%/23.24%. Comparable to the 25-year Wind, the average PE value was 20X. Considering that the company is a leading private network equipment company and is developing smoothly in overseas markets, we gave the company 25 times PE, gave the target price 83.75 yuan (previous value 78.30 yuan), and maintained a “buy” rating.

Risk warning: Grid investment falls short of expectations, new business development falls short of expectations, competition intensifies, and raw material prices rise.