Electricity, accelerate!
In the process of power transmission, the core facility required is the power grid.
Specifically, power transmission transmits the electricity generated by the power station through the transmission network in the grid to the demand center, which then distributes the power to the various end users.
In this process, it will rely to a large extent on the implementation of various transmission equipment such as transformers, circuit breakers, and disconnectors.
As the downstream of the power industry, the mainland's State Grid controls nearly 14% of the world's electricity market, and the purchase of power equipment accounts for eighty percent of the industry.
Therefore, the development prospects of the power medium and high voltage transmission equipment industry are largely affected by the scale of grid investment of the State Grid.
Since 2019, the prosperity of power grid construction has been on the rise, and the State Grid's investment in the power grid has continued to increase. With the start of eight UHV projects such as Hami-Chongqing, the scale of power grid investment of 538.1 billion yuan has been achieved in 2023, and according to the data, the total investment is expected to reach 609.2 billion yuan in 2024, and the market growth potential is huge.
This directly stimulates a large number of demand for medium and high voltage transmission equipment, which can be seen from the bidding amount for the procurement of power transmission and transformation equipment of the State Grid in recent years.
In recent years, the bidding amount of power transmission and transformation equipment has been rising, and the total amount will reach 70.76 billion yuan in 2023, a year-on-year increase of 27.9%. Leading power transmission and distribution suppliers such as Pinggao Electric, China Xidian, Sieyuan Electric and Guodian NARI have all benefited from this.
Among them, Sieyuan Electric has become an existence that cannot be ignored with its absolute leading bid-winning ranking.
Sieyuan Electric, deeply engaged in the electrical equipment industry, is a well-deserved leader in the industry, its business covers transformers, relay monitoring and reactive power compensation and other primary and secondary power transmission and transformation equipment.
According to the winning bids of the first three batches of State Grid power transmission and transformation projects in 2024, Sieyuan Electric's disconnectors, arc suppression coils and reactive power compensation product capacitors rank first in the industry with a market share of 15.3%, 21.6% and 14.2% respectively.
Not only that, the share of winning bids in subdivisions such as combined appliances, relays and transformers is also in the forefront of the industry, and it has become one of the core suppliers of power transmission and transformation equipment for the construction of the State Grid.
So, for many years, it has maintained a high level and won the bid for the State Grid, what is the hard power of Sieyuan Electric?
First, the fundamentals are sound.
The performance has risen steadily.
From 2020 to 2023, Sieyuan Electric's revenue has steadily increased from 7.373 billion to 12.46 billion, with a compound annual growth rate of 19.12%, far exceeding peers such as Xu Ji Electric, Pinggao Electric and China Xidian. Net profit increased from 933 million to 1.559 billion, an increase of 27.75% year-on-year in 2023, which is very eye-catching.
In the first half of 2024, the company's revenue increased by 16.27% year-on-year, and its net profit reached 1.559 billion, an increase of 26.64% year-on-year.
Strong profitability.
Overall, the company's ROE has remained at 16% in recent years and will increase in 2023, which shows that its profitability is very strong and its robustness is not inferior to that of Yangtze Power. At the same time, the net profit margin increased from 12.22% in 2022 to 12.91% in 2023, far exceeding peers such as Guodian NARI, Sifang and Xu Ji Electric.
In addition, the company's gross profit margin has continued to improve in recent years, reaching 31.75% in the first half of 2024, crushing Pinggao Electric, China Xidian and other peers, occupying a high position in the industry. The key to the increase in overall gross profit margin is mainly the increase in the proportion of revenue from the company's switch business with higher gross margin, which increased by 2% from 2023.
Second, the technical barriers are high.
In recent years, the company has been continuously conquering the field of ultra-high voltage and ultra-high voltage, and its technical level is ahead of the industry. In 2023, the core technology of 800kv GIS products will be broken, and the voltage transformer and power capacitor will be expanded to 750kv.
You must know that the higher the voltage level of power equipment, the higher the difficulty and complexity of the technology, and this is the generation of barriers.
Not only that, but the company has been increasing its R&D investment over the years to continue to expand its technological advantages. The R&D expense ratio has risen steadily, occupying a high position in the industry, reaching 7.21% in the first half of 2024, significantly ahead of peers such as Pinggao Electric, Samsung Healthcare and Xu Ji Electric.
So, what is the future of the company?
One is to deeply benefit from the increase in electricity demand at home and abroad.
Here we mainly talk about the overseas electricity consumption, and the domestic power grid investment demand mentioned above will not be repeated.
We know that after the installed capacity of new energy grows to a certain scale, the current distribution network access capacity will reach the limit, so in order to meet the demand for more new energy grid connection, the power grid needs to be expanded and upgraded.
According to statistics, at the end of 2022, up to 596GW of new energy projects such as photovoltaic and wind power in United Kingdom, France, Italy and Spain are waiting in line to be connected to the grid, with an average waiting time of three to seven years. The access of a large number of new energy power generation will directly drive the demand for power grid equipment.
Not only that, but the explosion of AI computing power has caused electricity consumption to soar, thus bringing huge power demand. The data predicts that by 2030, the global electricity consumption in the AI field will increase by 200 terawatt hours compared to 2023, accounting for 20% of the total electricity consumption of global data centers.
Therefore, in order to cope with the increase in global electricity demand, overseas power grid investment has continued to increase in recent years, showing huge room for growth, which is expected to reach 600 billion US dollars per year by 2030.
For Sieyuan Electric, as a power transmission and transformation leader, its overseas business covers more than 100 countries such as Switzerland and Spain, and the volume of overseas orders has accelerated in recent years, and the order volume in 2023 will increase by 34% year-on-year. As of the first half of 2024, the company's overseas revenue accounted for 24.56%.
Therefore, with the continuous expansion of overseas electricity demand, the company is expected to fully benefit from it, so that the overseas business income will be further released.
One is that supercapacitors open up new growth points.
Supercapacitors are new energy storage devices with fast charging and discharging capacity, long life and high low temperature adaptability, and are widely used in automotive and consumer electronics.
Olecrystal Carbon Energy is the first company in China to supply supercapacitors to passenger cars, mainly producing double-layer supercapacitors (EDLC) and hybrid capacitors (HUD), and the products are used in 60%-70% of automotive supercapacitor projects in the automotive field, and even the exclusive supplier of Volvo-XC40, Hongqi H5/H9 and other models.
Sieyuan Electric has been involved in the automotive electronics business since 2018, and in 2023, it acquired 70.42% of the equity of Engelin Carbon Energy, which further deepened the company's layout of supercapacitors. As of July 2024, the EDLC of Olecrystalline Carbon Energy has the capacity of 20 million units per year, and the annual output of HUDs can reach 4 million units.
According to the data, the global supercapacitor market size will be about $1.028 billion in 2023 and is expected to grow to $1.527 billion by 2030, with a CAGR of 6.03%. It can be seen that the supercapacitor market has a broad market space and is expected to become a new growth engine for the company's performance in the future.
Finally, to sum up.
Sieyuan Electric's performance growth is stable and its profitability is strong, even better than that of Yangtze Power. In recent years, the development of overseas business has been outstanding, and it is expected to continue to maintain high performance growth in the future with the acceleration of power grid investment and the acceleration of supercapacitor business.
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Source: Flying Whale Investment Research