Continued equity incentives are carried out. Performance targets show confidence in development. In 2022 to 2024, the company issued an equity incentive plan for three consecutive years. Performance targets show confidence in long-term development. In the 2024 equity incentive plan issued by the company, one of the performance assessment goals must be met: ① based on the company's 2023 revenue, the 2024-2028 growth rate is not less than 25%, 50%, and 80%, respectively; ② based on the company's 2023 net profit deducted from non-recurring profit and loss, and the 2024-2028 growth rate is not less than 30%, 60%, and 90%. Among them, the net profit growth rate target after deducting non-recurring profit and loss is higher than the 2023 equity incentive plan assessment target.
Energy products are an important engine for performance growth. Transformers are developing strongly. In 2023, energy products accounted for 72.4% of revenue, and gross margin increased by 3.31 pcts year-on-year to 21.05%, making it an important engine for performance growth. Among energy products, the transformer category continues to expand, covering photovoltaic boosting, distribution, box transformation, etc., and the production capacity layout and market development momentum is strong: ① PV boosting entered the US, Japan, EU and other markets earlier. The output value in Ji'an, Jiangxi in 2023 is about 1-1.2 billion yuan, and the Anhui and Mexico projects will be put into operation one after another; ② The transformation is mainly sold to Central and South America, Southeast Asia and other countries. A small number of products will enter the North American market in 2023, and production is currently being expanded in Ji'an, Jiangxi. ③ Box transformation began last year and gradually became available in batches Shipment.
Overseas genes are strong, and active layout expansion is expected to benefit from high global demand
The company has accumulated deep overseas development experience & active overseas production capacity layout & products have passed the US UL certification, which is expected to benefit from the high demand for overseas transformers. Since 2007, the company has established subsidiaries in Germany, the United States, and Japan. In 2019, it acquired 70% of the shares of the Malaysian lighting company DEG, and has rich experience in developing overseas markets.
In 2020, the company successfully developed a 35kV North American boost transformer and passed UL certification once. Currently, the company is laying out and constructing a Mexican factory and a production line in the US. We believe that global demand for transformers is strong, and after the production base under construction overseas is put into operation, it is expected to help the company develop overseas markets and is expected to bring significant overseas business contributions.
Investment advice
We believe that demand in the overseas transformer market is expected to increase, and with years of overseas market development experience and active expansion of overseas production capacity, the company has the advantage of obtaining alpha benefits overseas. We expect that in 2024-2026, the company will achieve operating income of 4.504, 5.644, and 7.07 billion yuan, respectively, with year-on-year growth rates of 24.10%, 25.30%, and 25.30% respectively; net profit attributable to shareholders of listed companies will be 0.358, 0.461, and 0.585 billion yuan, respectively, with year-on-year growth rates of 71.3%, 28.6%, and 27.0% respectively; EPS will be 0.91, 1.18, and 1.49 yuan respectively, corresponding PE is 19X, 15X, 12X (calculated at a closing price of 17.47 yuan on July 4, 2024). In summary, considering the development prospects of subsequent companies, coverage for the first time, a “gain in weight” rating was given.
Risk warning
Overseas trade policy risk, raw material price change risk, increased market competition risk, exchange rate change risk, industry demand change risk, etc.