Focusing on the transmission and distribution business and expanding the new energy market, the company is mainly engaged in R&D, production and sales of power transmission, distribution and control equipment used in the fields of new energy and new infrastructure. The main products are box-type substations, complete switchgear and transformers. The company is a key domestic enterprise that develops and manufactures transmission, distribution and control equipment and a leading enterprise of new energy electrical equipment in Guangdong Province. Total revenue in 2023 was 4.948 billion yuan, up 52.90% year on year; net profit to mother was 498 million yuan, up 87.67% year on year; non-net profit deducted from mother was 490 million yuan, up 90.82% year on year; gross profit margin was 22.69%, up 1.52 pct year on year. 2024Q1's total revenue was 1,034 billion yuan, up 46.35% year on year, and net profit to mother was 90 million yuan, up 104.30% year on year.

The downstream demand side gains strength, and the Three Seas business drives market demand

New infrastructure is being deployed at an accelerated pace in various regions, creating new momentum to stimulate innovation and expand demand. Thanks to the demand for forward-looking supporting electricity for new infrastructure, downstream new energy business demand increased. In 2023, the company's PV, land wind, sea wind, energy storage and other revenue accounted for 36%, 29%, 8%, and 6% respectively. Business revenue in the fields of photovoltaics, wind power, and energy storage increased by 83%, 22%, and 237%, respectively. In terms of offshore wind power, it is expected that starting in 2024, a new round of offshore wind power development cycle will soon begin, bringing new growth momentum to the company.

Furthermore, the company is promoting the global layout of its business in an orderly manner.

Investment advice: growth can be expected, give a “buy” rating

We expect revenue from 2024 to 2026 to be 65.24/83.69/10.392 billion yuan, with corresponding growth rates of 31.9%/28.3%/24.2%, respectively; net profit to mother of 6.69/8.61 billion yuan, with corresponding growth rates of 34.4%/28.7%/23.8%, respectively; and corresponding PE 19.77/15.36/12.40, respectively. First coverage, giving a “buy” rating.

Risk warning

The competitive pattern of the industry has deteriorated; domestic installed demand falls short of expectations; the risk of fluctuations in raw material prices, etc.