Business review: continuous product expansion, “2+X” strategic layout. The company has been in development for 25 years. At the beginning of its establishment, it was engaged in the manufacture and sale of toroidal transformers, then carried out product epitaxial iteration as downstream customer needs changed. It has now formed a “2+X” strategic layout, based on energy products and lighting products, while actively laying out new application fields such as vehicle power supplies, vehicle inductors, communication power supplies and energy storage. In terms of revenue share, the company's new energy products business grew rapidly in 2023, accounting for 72%, landscape lighting accounting for 22%, and other businesses (including incubation businesses) accounting for 5%.
Performance: Benefiting from the continued improvement of the global new energy industry, the company's performance achieved rapid growth.
The CAGR for revenue and net profit attributable to mother for 2018-2023 was 27% and 38%, respectively. In 2023, the company achieved operating income of 3.63 billion yuan, an increase of 28.7% year on year; net profit to mother was 0.21 billion yuan, an increase of 9.3% year over year (including 50.0202 million yuan of the company's depreciated shares). 24Q1 achieved operating income of 0.773 billion yuan, a year-on-year increase of 21.05%; net profit to mother was 0.058 billion yuan, an increase of 206.73% year-on-year, showing a high increase.
Core highlight 1: Inductance switching to inverter customers, PV boosting boom The company successfully entered inverter customers with high-frequency inductor products in the early stages. In 2021, the company continued to strengthen the depth and breadth of cooperation with major customers. The PV boost variable achieved mass production, and product delivery capabilities were recognized by customers. The total revenue of products supporting the photovoltaic industry was 0.69 billion yuan, an increase of 136.22% year on year (of which photovoltaic boost conversion increased 989.33% year on year, high frequency inductance increased 58.11% year on year). In 2023, the company's revenue from step-up to a single category of products has exceeded 1 billion yuan, and has completed the expansion of new energy product categories such as photovoltaic smart box-type substations and all-in-one computers. It has successfully expanded from the original core components to complete equipment, and achieved a breakthrough from 0 to 1, laying the foundation for subsequent growth.
Core highlight 2: The Mexican base is about to be built. Overseas direct sales layout of transformers is currently mismatched between supply and demand in overseas markets, led by the US. The demand side is reflected in the replacement of old power grids, demand for new energy grids, manufacturing backflow, etc. The supply side is reflected in a shortage of labor and insufficient momentum for foreign investment to expand production, leading to a mismatch between supply and demand, extended transformer delivery cycles, and overflow of overseas orders. The company has taken the lead. It has a history of selling overseas transformer products. It has participated in many US exhibitions over the past 24 years. At the same time, overseas production capacity is accelerated. It is expected to land overseas distribution production lines in 24, and the Mexican factory is expected to be put into operation in the second half of '25, which will directly radiate customers in Europe and the US in the future.
Investment suggestions: The company boosts and changes production capacity to be arranged in an orderly manner, overseas direct sales channels are rapidly entering, and production capacity is expanded in an orderly manner. We expect the company's 2024-2026 revenue to be 4.865, 6.348, and 8.201 billion yuan, respectively, corresponding growth rates of 34.0%, 30.5%, and 29.2%; net profit to mother is 0.35, 0.451, and 0.575 billion yuan, respectively. The corresponding growth rates are 67.3%, 28.9%, and 27.4%, respectively, based on the closing price on July 5, corresponding to 2024- In 2026 PE was 21X, 16X, 13X, maintaining the “recommended” rating.
Risk warning: risk of international operation, risk of increased market competition, risk of exchange rate fluctuations.