XJEC(000400) 长江证券·2024-03-10 16:00Investment Rating - The report assigns a "Buy" rating to XJ Electric (000400 SZ) [8] Core Views - XJ Electric's DC transmission business is expected to grow rapidly due to the dual drivers of increased UHV DC volume and flexible DC value upgrades in China [2] - The company's domestic power distribution and transformation business is developing positively, with stable market share and steady growth [2] - Smart meters are expected to see a surge in demand both domestically and internationally, while the power supply and charging-swapping businesses also show good demand [2] - XJ Electric is actively expanding into emerging fields such as heavy-duty truck battery swapping and hydrogen production power supplies [2] Company Overview - XJ Electric, a veteran in the electrical equipment manufacturing industry, has entered a new development phase after joining China Electrical Equipment Group in 2022 [5] - The company operates 31 subsidiaries and branches, with six major business segments: smart power distribution and transformation systems, DC transmission systems, smart medium-voltage power supply and distribution equipment, smart meters, EV charging and swapping systems, and EMS processing services [5] - Historically, the company has shown healthy growth in revenue, gross margin, expense ratio, R&D investment, and profit performance [5] DC Transmission Business - DC transmission is a key driver for XJ Electric's future performance, with China planning 9 UHV DC projects during the 14th Five-Year Plan, 4 of which have already started [6] - The adoption of flexible DC technology in projects like Gansu-Zhejiang and Inner Mongolia-Beijing-Tianjin-Hebei is expected to significantly increase the value of converter valve systems, with XJ Electric holding a top-three market position [6] - The company's DC transmission business is expected to drive significant revenue growth, with the flexible DC converter valve market being highly competitive and concentrated [6] Power Distribution and Transformation Business - XJ Electric's power distribution and transformation business is expected to grow steadily as China transitions to a new power system [7] - The company has maintained a stable market share in the domestic power distribution and transformation market, with significant growth in State Grid's equipment tenders in 2022-2023 [7] - Overseas demand for transformers, high-voltage switchgear, and meters is also growing, driven by energy transition and infrastructure upgrades [7] Smart Meter Business - XJ Electric's smart meter business is poised for growth, with both domestic and international demand expected to increase [7] - The company has been expanding its presence in overseas markets, particularly in Southeast Asia and Africa, with recent breakthroughs in Brazil and Italy [79] - The domestic market is entering a new replacement cycle, with State Grid's first batch of meter tenders in 2024 showing an 85% year-on-year increase [75] Financial Projections - The report forecasts XJ Electric's net profit attributable to shareholders to be approximately 900 million yuan in 2023 and 1.15 billion yuan in 2024, with corresponding valuations of 28x and 22x, respectively [8]