Core views

The company started with rubber seals and gradually covered composite insulation products for substations and transmission and transformation lines to solve long-term aging pain points and have a long service life of 30 years. The company innovates and develops composite crossload products, significantly reducing the size of poles, saving investment, and leading the power grid miniaturization revolution. The overseas power grid investment boom cycle has arrived, and orders from ABB, Siemens, and GE have increased. The company actively participated in overseas projects and laid out production capacity, which is expected to fully benefit.

In the history of retrading, the intensive delivery period for UHV has arrived, the cost of raw materials is low, overseas business accounts for more than half, and there is great flexibility in improving performance. The company's 2024-2026 earnings are expected to be 0.329, 0.443, and 0.604 billion, respectively. The corresponding valuations are 31, 23, and 17 times, respectively, giving a “buy” rating.

Composite insulators have superior performance. The company is leading the trend of composite external insulation for transmission and transformation. Compared with ceramic and glass insulators, composite insulators are lightweight, have excellent water repellency and fouling resistance, have excellent electrical insulation properties, and are gradually replacing inorganic insulators. The composite insulators introduced by the company in 2003 meet and promise a service life of more than 30 years, are maintenance-free throughout the life cycle, and have significant advantages in comprehensive cost. Since the company's launch, the global penetration rate of composite insulators in substations has exceeded 40% in 2019.

The launch of composite cross load products is expected to lead the revolution in miniaturization of external insulation in power systems. On the basis of composite insulators in substations, the company creatively launched composite crossbars in 2009, which can solve problems such as wind deflection, bird droppings, rain and ice flash caused by traditional steel crossbars and suspension insulators, and save land and material costs. The product has received an order of 47 million yuan from the RICA project of the UK National Grid, which can increase the capacity of 275 kV lines to 400 kV, saving £0.286 billion in investment and 39,000 tons of carbon emissions. The future is expected to lead the “miniaturization” revolution of power grids and become one of the company's future growth points.

Going overseas is the company's core strategy. ABB, Siemens, and GE have increased orders, actively participated in overseas projects, and deployed production capacity to achieve localization

The company has established good partnerships with ABB (now Hitachi Energy), GE, and Siemens, all three of which account for more than 60% of the revenue of overseas customers. Currently, many countries have launched power grid investment upgrade plans, and overseas grid investment has reached a boom cycle. Against this backdrop, the three major companies have increased their revenue and orders, and are continuously improving their performance guidelines. The company actively participated in overseas EPC projects, prepared to build a factory in the US to localize production capacity, and is expected to fully benefit from the wave of overseas power grid investment.

Reviewing history, the company is moving beyond the cycle to grow

Historically, the company's performance has fluctuated, mainly affected by the UHV delivery cycle and raw material price cycle. The company has a high market share in the UHV substation insulator market, high unit price for UHV orders, and strong profitability. Currently, a new round of UHV lines is entering a period of intensive delivery, raw material prices are low, overseas business has entered a rapid growth path, and the company is expected to break out of the cycle and move towards growth.

Give the company a “buy” rating

The company is an excellent leading enterprise for composite external insulation of power systems. In the medium to near term, the upward cycle of UHV and the downward resonance of raw materials has brought flexibility to the company's performance; in the long run, overseas power grid investment will maintain a long-term boom, and the trend of composite external insulation will continue to progress, creating room for long-term growth. The company's performance in 2024-2026 is expected to be 0.329, 0.443, and 0.604 billion, respectively. The corresponding valuations are 31, 23, and 17 times, respectively, giving a “buy” rating.