SAC(SH:600268) Soochow Securities·2024-09-29 12:30Investment Rating - The report assigns an "Accumulate" rating for the company, marking its first coverage [1]. Core Views - The company is a well-established secondary equipment supplier with over 80 years of comprehensive development, evolving from a water instrument manufacturing factory in 1940 to a recognized provider of power automation solutions in China. The business has expanded from traditional power grid and plant automation to various fields including rail transit, information technology, information security, smart primary equipment, and power electronics. The company is expected to achieve a revenue CAGR of 7% from 2023 to 2026 [2]. - The company is poised to benefit from the acceleration of grid investments, with the State Grid's investment exceeding 600 billion in 2024, indicating a robust growth phase for China's power grid construction. The company's market share in the State Grid is projected to increase from 9% in 2023 to 11% in 2024 YTD, driven by the demand for clean energy integration and supporting infrastructure for ultra-high voltage lines [2]. - The company is actively expanding its business in rail transit and information technology, with the rail investment expected to accelerate, contributing to the growth of its rail transit automation business. Additionally, the company is focusing on power electronics and primary equipment, which are anticipated to provide new growth opportunities as the renewable energy market develops [2]. - The company's revenue and profit are expected to grow steadily, with projected net profits of 273 million, 313 million, and 352 million for 2024, 2025, and 2026 respectively, reflecting year-on-year growth rates of 20%, 15%, and 12%. The corresponding valuations are estimated at 23x, 21x, and 18x based on the current price [2]. Summary by Sections 1. Established Secondary Equipment Supplier - The company has a long history and has undergone multiple transformations, covering all aspects of the new power system. It has become a well-known supplier of power automation solutions in China [19]. - The company benefits from the backing of the Huadian Group, which provides a stable shareholding structure and experienced management [19]. - The company has maintained steady revenue growth, with a CAGR of 11% from 2019 to 2023, and a significant increase in net profit, indicating improving profitability [26]. 2. New Power System Development - The "dual carbon" strategy is driving stable growth in grid investments, with expectations of over 600 billion in 2024, marking a new growth phase for grid construction [40]. - The company is expected to benefit from the ongoing energy transition, with traditional energy sources remaining essential alongside the development of renewable energy [40]. 3. Multi-Business Collaboration - The company is positioned to leverage its capabilities in rail transit automation, with significant investments expected in this sector [2]. - The information security and technology business is anticipated to grow steadily, driven by internal demand from the Huadian Group [2]. 4. Profit Forecast and Investment Rating - The company is projected to achieve net profits of 273 million, 313 million, and 352 million for 2024, 2025, and 2026, respectively, with corresponding valuations of 23x, 21x, and 18x [2].