Company Profile

JILIN JINGUAN ELECTRIC CO., Ltd is a China-based company engaged in the research and development, manufacture and sales of intelligent electrical switchgear equipment and supporting components. The Company's major products include cubicle-type gas insulated switchgear (C-GIS) intelligent ring main units, box-type transformer substations and low-voltage switchgear cabinets. Its other products include intelligent high-voltage switchgears, the supporting vacuum circuit breakers and solid insulated ring main units, among others. (Source: MarketScreener)

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Jinguan Electric (“the company”) focuses on industrial and commercial energy storage to provide customers with integrated solutions.

The company already has a complete layout for its energy storage business, as it is able to independently produce the products except for battery cells. At present, the company has certain capacity for product delivery. Specifically, the company has considerable demonstration projects for photovoltaic distribution and storage, substation power grid for peak load and frequency regulation, and industrial and commercial energy storage.

In 2023, the company will leverage its strength in local channels in Henan to build hit products at the level 100 kilowatt hours. The company focuses on industrial and commercial energy storage as well as distributed storage markets to work on the growth of sub-sectors, which are set to contribute to its profitability.

The company bases its charging pile business in Henan and gradually expands.

The company’s charging pile business is expected to make effective contribution to its performance starting from 2022. The company has signed agreements on a number of projects in this business, showing strength in Henan Province, especially in Nanyang locally. The business is expected to maintain a high revenue growth for the year.

The company is able to independently supply charging modules for its charging pile, which maintains a high gross profit margin in the industry. Benefiting from policies and market channel advantages, the business is set to grow rapidly.

For the traditional business, the company has strong know-how for surge arresters, which could grow doubly this year due to UHV development.

The company has strong raw material formula know-how in the arrester industry.

Currently, only 4 manufacturers in the UHV market have supply qualifications.

The average gross profit margin of the arrester reaches 40%+, of which the UHV-related gross margin reaches 60%+. The current market pattern is a stable and typical high-threshold market.

UHV arresters account for 30-40% of the total number of arresters. We expect that the company’s arrester business will grow rapidly in 2023 in the context of accelerated investment in UHV.

Earnings forecast and investment recommendation

We estimate the company’s profit at CNY 81 million, CNY 135 million and CNY 164 million for 2022, 2023 and 2024, respectively, implying a PE ratio of 30.6x, 18.4x and 15.1x, respectively, based on the closing price on February 9, 2023.

We give the company an initial rating of “Buy”.

Potential risks

Poorer-than-expected policy effect; less-than-expected downstream; rising raw material prices; macroeconomic fluctuations; changes in industry policies.