Haixing Electric Power released its 2023 annual report. In 2023, the company achieved total operating revenue of 4.200 billion yuan, an increase of 26.91% year on year; realized net profit to mother of 982 million yuan, an increase of 47.90% year on year; gross sales margin of 41.90%, +3.67 pct year on year, and a net sales margin of 23.39%, +3.33 pct year on year. Among them, 23Q4 achieved revenue of 1,328 billion yuan, +43.84%/+33.53% YoY; realized net profit of 314 million yuan, +61.17%/+35.37% YoY.

The increase in the share of AMIs in the electricity business led to an increase in gross margin. Electricity revenue was 3,595 billion yuan, +23.93% year-on-year. Among them, the domestic market was 1,034 billion yuan, -5.47%; overseas 2,561 billion yuan, +41.72% year over year. The share of revenue from AMI in the electricity business increased dramatically, accounting for about 60% of the company's total revenue from overseas smart electricity business. The increase in the share of AMI projects led to an increase in gross margin.

The overseas distribution business surpassed expectations. Distribution revenue was 406 million yuan, +24.19% YoY. Among them, the domestic market was 289 million yuan, -4.84% year on year; overseas was 117 million yuan, +406.67% year over year. Continued breakthroughs in the power distribution business in Africa have led to rapid growth in overseas distribution business.

The new energy business is growing rapidly. Revenue from new energy sources was 163 million yuan, +283.50% year-on-year. Among them, domestic 50 million yuan, +78.14% year on year, and overseas 113 million yuan, +672.38% year over year.

Demand from Africa and Southeast Asia is hot, and European demand is expected to be relapsed. From a regional perspective, the domestic market was 1,408 billion yuan, -4%; Latin America was 799 million yuan, +4%; Southeast Asia was 872 million yuan, +32%; Africa was 1.03 billion yuan, +157%; and Europe was 118 million yuan, +428% year over year. Overseas countries have become the biggest contributor to growth. Demand is strong in Africa and Southeast Asia, while Europe is expected to achieve rapid growth in 24 years as policies advance, becoming a new growth point.

Investment advice: We expect the company's net profit for 24-26 to be 1,216/15.05/1.802 billion yuan, +23.8%/23.7%, corresponding EPS of 2.49/3.08/3.69 yuan, respectively. Among them, the 24-25 net profit forecast was raised from 10.67/1,256 billion yuan, an increase of 13.96%/19.82%, maintaining the “buy” rating.

Risk warning: Overseas meter investment falls short of expectations, and the development of the new energy business falls short of expectations