Key points of investment
Incident: Haixing Electric Power released its 2023 annual report, achieving revenue of 4.200 billion yuan (+27%) and net profit to mother of 982 million yuan (+48%). The gross profit margin and net margin were 41.90% and 23.39% respectively, up 3.67 and 3.33 pcts year-on-year. Among them, Q4 achieved revenue of 1,328 million yuan in a single quarter, with significant year-on-month growth, significantly exceeding expectations, and achieving net profit of 314 million yuan to mother, a record high of single-quarter results.
Smart electricity sector: Achieved revenue of 3,595 billion yuan (+24%) in 2023, and gross margin increased 5.15 pcts year-on-year to 43.85%. By region, domestic business revenue was 1,034 billion yuan (-5%) and overseas business revenue was 2,561 billion yuan (+42%). Among them, the African market became the biggest source of revenue increase. After deducting revenue from distribution and new energy business, the company's African meter business revenue doubled year-on-year, from 310 million to 800 million. In addition, it also achieved significant revenue growth in Asian, European and other markets. Latin American market companies maintained a high market share, and revenue was relatively stable. The company continues to promote the supply chain globalization strategy, initiated factory layout plans in Europe and Latin America, and continues to implement overseas localization management strategies. Furthermore, in 23 years, the share of revenue from system software and solutions increased dramatically, accounting for 60% of overseas revenue. On the one hand, it achieved better profitability, and on the other hand, deepened its stickiness with local power customers.
Intelligent power distribution sector: Achieved revenue of 406 million yuan (+24%) in 2023, with domestic business revenue of 289 million yuan (-5%) and overseas business revenue of 117 million yuan (+407%). Overseas has already entered a new round of power system construction and transformation. The company is actively promoting product development and market expansion in the distribution network business. It has won the first bid for the South Grid collection in China, and has begun batch support for new energy power plants such as photovoltaics, while the overseas side has won the bid and delivered for distribution network collection projects in the African market. With the gradual implementation of overseas distribution network product certification, the company is expected to reuse overseas meter marketing channels to promote the distribution network business as a new performance growth point.
Profit forecasting
We expect the company's net profit to be returned to mother in 2024-2026, respectively
1,235/15.11/1,822 billion yuan, corresponding to 2024-26, the company's PE was 19.71x/16.10x/13.36x, respectively. It was covered for the first time, giving it an “increase in weight” rating.
Risk warning:
Demand for electricity meter replacements fell short of expectations; overseas market progress fell short of expectations.