Description of the event
The company released its report for the first quarter of 2024. 24Q1 achieved operating income of 4.711 billion yuan, a year-on-year decrease of 2.94%, and net profit to mother of 203 million yuan, an increase of 7.27% year-on-year, after deducting 190 million yuan in non-net profit, an increase of 6.78% over the previous year.
Incident comments
In 24Q1, the company's revenue declined slightly, which is expected to be due mainly to the pace of project delivery and the operating income of Western Power New Energy and Western Power Comprehensive Energy during the same period last year. The company's overall gross margin reached 17.85%, a year-on-year increase of 2.51 pct, which is a significant improvement.
In terms of cost rates, the company's three overall rates reached 12.88%, up 1.9 pct year on year. Among them, sales rate reached 3.47%, 0.74 pct year on year, management rate reached 6.2%, 0.53 pct year on year, R&D rate reached 3.21%, and 0.63 pct year on year, all increased to varying degrees. Revenue is expected to drop slightly in the main quarter.
In terms of cash flow, the company achieved a net operating cash flow of 225 million yuan in the first quarter, compared to -1,906 million yuan in the same period last year. The improvement was significant, mainly due to the company's increased sales repayment efforts.
Overall, the company's net profit margin for the first quarter reached 4.31%, an increase of 0.39 pct over the previous year. Compared with an increase of 0.11 pct for the full year of last year, the net profit margin continues to be in the improvement channel. Assuming a further increase in the company's revenue, the improvement in net profit margin is expected to be more significant, and the profit level is also expected to be further raised.
In terms of orders, the company's State Grid power transmission and transformation orders continued to grow in the first quarter. In the State Grid's first tender for power transmission and transformation equipment in 2023, the company won 1.09 billion yuan, ranking first in the batch, with an increase of 23.9%. In addition, the company's off-network business also got off to a good start, winning bids for various types of projects such as Tongwei, CGN, Datang Group, Three Gorges Energy, Guangdong Guangdong Electric, and China Aluminum.
In addition, the UHV AC/DC project has already entered the start-up cycle. In 2023, the total number of tenders for each batch of State Grid UHV equipment was 41.54 billion yuan, an increase of 11 times over the previous year. The company participated in more than 10 kinds of equipment tenders and won a total of 7.93 billion yuan. Among them, equipment such as converter transformers, circuit breakers, DC wall bushings, and switches ranked first. In 24 years, stock orders have gradually entered the release cycle. At the same time, projects such as Qinghai-Tibet ±400kV Changzhi, Saudi Arabia ±500kV, and Nanjiang-Sichuan and Chongqing ±800kV flexible are expected to further boost the company's order level.
It is expected that in the future, as the pace of project delivery accelerates, the company's revenue growth rate may increase, which is expected to drive a further increase in profit levels. We estimate that the company's net profit for 24 and 25 will be about 1.2 billion yuan or 1.83 billion yuan, which is about 30 or 20 times PE. Maintain a “buy” rating.
Risk warning
1. The direction of grid investment falls short of expectations;
2. The power grid project fell short of expectations.