Company Profile

Shijiazhuang Kelin Electric Co., Ltd. is a China-based company principally engaged in intelligent grid business. The Company operates through two main segments. The Main Business segment is primarily involved in the research, manufacture and sales of electricity substation, electricity distribution and electricity utility equipment for intelligent grid, high-low voltage switchgears and equipment, photovoltaic distributed generation equipment and other equipment. The Other Business segment is mainly involved in the provision of technical services, disposition of industrial waste and building rental, among others. (Source: MarketScreener)

Event

The company released its 2023 semi-annual report.

For the first half of 2023, the company reported CNY1.338 billion in revenue, a year-on-year increase of 35.35%; CNY111 million in net profit attributable to shareholders in H1, up 38.14% year-on-year; and CNY69 million in net profit attributable to shareholders and excluding gains and losses from non-recurring items, down 3.68% year-on-year.

For the second quarter of 2023, the company reported CNY812 million in revenue, up 21.38% YoY and 54.08% QoQ; CNY71 million in net profit attributable to shareholders, up 10.94% YoY and 73.17% QoQ; and CNY40 million in net profit attributable to shareholders and excluding gains and losses from non-recurring items, down 31.03% and up 33.33% QoQ.

Comments

Year-over-year rise in expense and credit impairment losses weighed on the performance of Shijiazhuang Kelin Electric Co., Ltd. (“the company”).

The company ramped up investment to strengthen product and market development of charging piles and energy storage business. The management expense ratio and R&D expense ratio rose significantly in Q2, 2023, up 0.81pps and 2.02pps year-on-year, respectively.

As the company's revenue grew, the accounts receivable by the end of Q2, 2023 rose by CNY190 million from the end of 2022, resulting in a credit impairment of CNY27.8759 million in Q2, an increase of 381.16% compared with Q2 last year, dragging down the company’s overall performance.

The company takes the lead in smart grid equipment and continues to win bids.

In the first half of 2023, the company released a new generation of new energy smart box change, which was applied to multiple wind power projects. The independently developed fully localized feeder automation terminal and fully localized station automation terminal have realized the localization of hardware components and software operating systems.

The company participated in the successful development of 252 kV phase selective fast low-frequency circuit breaker, which realizes fast and reliable breaking of low-frequency system and improves the breaking performance and electrical life of the circuit breaker, safeguarding the application of flexible low-frequency transmission technology and solving the problems of large-capacity short-circuit current rapid breaking and limitation of conventional AC power grid.

With product update and iteration as well as leading technologis, the company has won the multiple bids of the State Grid and China Southern Power Grid over the past year, with a total bidding amount of CNY724 million.

The company continued to make breakthroughs in new energy business, which became new steam driving its revenue growth.

In January 2023, the company was included in the third batch of national smart photovoltaic pilot companies. In July 2023, the company released a new generation of 40/60kW photovoltaic grid-connected inverter, which boasts efficient power generation, convenient operation and maintenance, safety and reliability, as well as intelligent network management. In the past year, the company has won the multiple bids for photovoltaic EPC projects, which amounted to as much as CNY873 million.

In March 2023, the company released the fourth generation of charging pile products, with a maximum power of 480kw, 500/600A liquid-cooled supercharging gun, flexible dynamic power distribution function, better charging efficiency, rich charging modes, smart monitoring and management, as well as friendly operation interface. The product has been put into application in many markets.

In April 2023, the company’s its subsidiary Kelin Cloud Energy launched an upgraded version of smart energy cloud payment system, providing remote billing, query, and payment of water, electricity, gas and heat consumption for enterprise parks and residential communities, making a major breakthrough in the energy management system.

Earnings forecast and investment recommendation

As a leader in smart grid transmission and distribution business, the company has comprehensive product coverage and strong technological innovation. The company has won an increasing number of bids in the photovoltaic business year by year. Its charging piles and energy storage also have strength in terms of product and region. The company's revenue is expected to grow strongly.

We estimate the company’s net profit attributable to shareholders at CNY226 million, CNY310 million and CNY425 million for 2023, 2024 and 2025, respectively, implying a PE ratio of 15.4x, 11.2x, and 8.2x, respectively, based on the closing price on August 7, 2023.

We maintain the rating of “Outperform”.

Potential risks

Less-than-expected grid investment; unexpected PV EPC business; fluctuations in raw material prices.