The increase in 2023 performance was in line with expectations. The company's operations continued to be steady. In 2023, the company achieved total revenue of 6.478 billion yuan, up 18.64% year on year; net profit of 541 million yuan, up 23.46% year on year; net profit margin of 33.70%, up 1.57 pct year on year; net profit margin 9.35%, up 0.3 pct year on year; the company's net cash flow from operating activities in 2023 was 1,259 million yuan, up 205.17% year on year. Cash flow from operating activities Continuous improvement. 2024Q1: Net profit to mother was 101 million yuan, up 32.04% year on year, net profit margin 6.98%, up 0.1 pct year on year.

Reasonable business structure and perfect supply chain layout

The company's main business includes scheduling and cloud-based automation, power transmission and transformation automation, intelligent distribution of electricity, integrated energy and virtual power plants, new energy and energy storage, industrial Internet and intelligent manufacturing, etc., forming a complete industrial chain. In 2023, intelligent power distribution accounted for 57.02%, scheduling and cloud business accounted for 17.01%, and transmission and transformation automation business accounted for 9.62%. The revenue of the three major businesses was 36.94/11.02/623 billion yuan, respectively, an increase of 20.99%/-2.99%/45.22% year-on-year.

Innovative businesses continue to be explored, and overseas markets continue to break through

In 2023, the company built the first city-level virtual power plant in China, won the bid for two virtual power plant pilot projects in Shandong Huaneng and Jinan Energy Investment, and passed the adjustable capacity test in Shandong Province; it independently developed and produced the current domestic liquid-cooled grid energy storage PCS with a maximum capacity of 2000 kW, and has successfully connected to the grid. The company continued to increase overseas market development efforts. In 2023, overseas revenue was 374 million yuan, gross profit margin was 30.68%, an increase of 31.09% over the previous year.

Investment advice

We expect net profit from 2024 to 2026 to be 6.92/8.48/1,021 million yuan, respectively, and the corresponding PE will be 21.85/17.82/14.81, respectively, covered for the first time, and given a “buy” rating.

Risk warning

Power grid investment falls short of expectations; market competition risk; overseas business operation risk: