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）

Event

The company released its 2022 annual report and the financial results for the first quarter 2023.

The company achieved a revenue of CNY606 million in 2022, up 13.99% year-on-year.

The 2022 net profit attributable to shareholders was CNY79 million yuan, up 14.02% year-on-year. The net profit attributable to shareholders and excluding income from non-recurring items was CNY72 million yuan, up 19.66% year-on-year.

For the first quarter 2023, the company achieved a revenue of CNY86 million, up 20.79% year-on-year. The net profit attributable to shareholders was CNY9 million, up 306.21% year-on-year. The net profit attributable to shareholders and excluding income from non-recurring items was CNY8 million, up 358.63% year-on-year.

The company’s performance was slightly better than market expectations.

Comments

Arresters and network configuration products are the major sources of the company’s revenue, and charging piles and energy storage also start a second growth curve for the company.

Arresters and network configuration products are the major sources of the company’s revenue. In 2022, the company achieved a revenue of CNY219 million from its arrester business, up 8.30% year-on-year. The revenue from network configuration products reached CNY248 million in 2022, up 17.40% year-on-year.

The two businesses accounted for more than 75% of the company’s total revenue, making them the most important sources of income.

Charging piles and energy storage have gradually become a new driver of the company’s growth. In 2022, the company’s revenue from charging piles reached CNY61 million, and the revenue from energy storage reached CNY74 million, accounting for more than 20% of total revenue.

The company’s profitability began to improve further in 4Q22.

From the perspective of profitability, the company’s gross profit margin improved significantly year-on-year in 4Q22 and 1Q23. Specifically, the improvement in 4Q22 was mainly due to the recognition of revenue from UHV arresters and the optimization of shipment structure.

The improvement in 1Q23 was due to the rise in the price of non-UHV arresters.

It is expected that as new orders after the price rise account for a higher proportion in revenue recognition, the gross margin optimization of non-UHV arrester will be gradually confirmed in 2023.

The company has abundant orders for its traditional business. Marketing efforts from county to county boost its charging pile business.

The company’s orders in hand for arrester business reach CNY230 million. The year 2023 marks a peak period for the State Grid’s UHV projects. The subsequent biddings for projects from eastern Gansu to Shandong are expected to boost the company’s arrester business.

The company promotes its business model from county to county. Based on its home province of Henan, the company makes efforts in central China. Its charging pile business is expected to usher in rapid growth.

Earnings forecast and investment recommendation

We estimate the company’s net profit attributable to shareholders at CNY143 million, CNY204 million and CNY266 million for 2023, 2024 and 2025, respectively, implying a PE ratio of 17.6x, 12.4x and 9.5x, respectively, based on the closing price on May 5, 2023.

We maintain the rating of “Buy”。

Potential risks

Poorer-than-expected policy effect; less-than-expected downstream demand; intensified competition in the industry; macroeconomic fluctuations; changes in industry policies.