Performance continued to accelerate growth, in line with expectations. Recently, the company announced its 2020 results. In 2020, the company realized revenue of 909 million yuan, an increase of 28.84% over the same period last year; net profit of 318 million yuan, an increase of 33.37% over the same period last year; net profit of 300 million yuan, up 42.67% over the same period last year; net cash flow from operating activities was 70.96 million yuan, an increase of 139.30% over the same period last year; basic earnings per share were 3.92 yuan, and the company proposed to pay out 10.00 yuan (including tax).

Benefiting from the intelligent trend of the Internet of things and distribution network, the core products are expected to achieve rapid development.

In the long run, there will be a structural change in grid investment: first, the proportion of investment in distribution terminals will continue to rise. Second, the proportion of investment in the field of intelligence and information related to the construction of the power Internet of things will increase significantly, and with the increase of volatility brought by renewability and distribution, it will bring new challenges to the stability and reliability of the existing distribution network. in the construction of smart grid, no matter the optimization of distribution network structure, the upgrading and intellectualization of distribution equipment or the construction of distribution automation system will accelerate the trend of primary and secondary integration. According to the company's annual report, the company's core product, the primary and secondary integrated intelligent post switches, has not only developed in the existing advantageous market Zhejiang, but also has been put into operation in Jiangsu, Shandong, Henan and other places. the sales volume of the company's smart post switches reached 20700 sets in 2020, an increase of 36% over the same period last year. If calculated on the basis of a set of 3.7-38000 yuan in the prospectus, the company's sales of intelligent post switches reached 780 million in 2020. It accounts for more than 85% of the company's revenue. On this basis, if the demand of 300000 sets of stock in the pilot province of Zhejiang is calculated, according to the fact that Zhejiang accounts for about 6.5% of the national electricity consumption in 2020, the space of the smart pole switch market is more than 150 billion. Prior to this, the State Grid has issued the first and second application promotion of integrated standardized distribution equipment, in which strict specifications are put forward for the design principles and main framework of the first and second integration of standardized column switches and ring network cabinets, compared with the previous standards. the new standard puts forward higher requirements for product integration and precision of research and judgment, which is consistent with the company's product standards, on this basis. The company's primary and secondary integration of intelligent pillar switches with product advantages, is expected to rely on the radiation of advantageous areas and the continuous development of provinces to achieve high-speed development.

The company has outstanding competitive advantages in technology, products and customer resources, and new products are expected to open up new spaces. For the new type of intelligent distribution network equipment, the production technology integration is high, the development is difficult, the manufacturing process is complex, and has a high technical threshold. In terms of technical and product advantages, different from traditional on-column switches and primary and secondary complete sets of on-column switches, the company's core product, intelligent on-column switches, has successfully achieved primary and secondary full fusion, with the characteristics of intelligence and integration. The accuracy of short circuit fault research and diagnosis is more than 99%, the accuracy of single-phase ground fault research is 90%, and the accuracy of reclosing is close to 100%. After years of technology development and continuous R & D investment, the company has mastered a number of advanced core technology achievements in the industry. according to the company's annual report, the company has obtained 113 patents and 84 software copyrights, and the core product performance is in the forefront of the industry. and has obtained a number of certifications. In addition to the core products, the company also develops 20kV primary and secondary integration of intelligent post switches, primary and secondary integration of ring network cabinets and other intelligent distribution products and distribution network information services, which is expected to continue to open new space. In terms of customer resources, the company has established a close cooperative relationship with power supply companies at all levels of State Grid, such as State Grid Zhejiang Electric Power Co., Ltd., and will continue to deepen cooperation in the future by virtue of the company's precipitation in the field of primary and secondary integration.

Investment advice: maintain the company's buy-An investment rating and give the company a 6-month target price of 100 yuan. We estimate that the company's income from 2021 to 2023 will be 11.87,15.63 and 2.073 billion yuan respectively, the revenue growth rate will be 30.6%, 31.7% and 32.7% respectively, and the return net profit will be 4.16,5.42 and 717 million yuan respectively, with a growth rate of 30.7%, 30.3% and 32.3% respectively. Maintain the company's buy-An investment rating and give the company a six-month target price of 100 yuan.

Risk hint: the change of industry policy is not as expected, and the construction of fund-raising projects is not as expected.