Investment Rating - The report maintains a "Buy" rating for the company with a target price of RMB 32.40 [7][5]. Core Insights - The company reported a Q3 revenue of RMB 3.006 billion, representing a year-over-year increase of 9.30% but a quarter-over-quarter decrease of 26.66%. The net profit attributable to the parent company was RMB 268 million, with a year-over-year increase of 0.26% and a quarter-over-quarter decrease of 37.25% [1][2]. - The company's gross margin improved due to quality enhancement and revenue structure optimization, with a gross margin of 23.88% for the first three quarters of 2025, up 1.94 percentage points year-over-year. This trend is expected to continue [2][3]. - The company is well-positioned to benefit from the ongoing investment in the national grid, with significant growth in its direct current transmission business linked to the peak construction cycle of ultra-high voltage projects [1][3]. Summary by Sections Financial Performance - For the first three quarters of 2025, the company achieved a total revenue of RMB 9.454 billion, a slight year-over-year decrease of 1.38%. The net profit attributable to the parent company was RMB 901 million, reflecting a year-over-year increase of 0.75% [2][5]. - The Q3 results showed a revenue of RMB 3.006 billion and a net profit of RMB 268 million, indicating fluctuations primarily due to the timing of project revenue recognition [2][3]. Market Opportunities - The report highlights ongoing ultra-high voltage construction and planning, with several projects approved and operational, indicating a robust pipeline of orders for the company. The total expected bidding amount for the fourth round of equipment procurement is projected to exceed RMB 15 billion [3][4]. - The company has maintained a leading position in both domestic and international markets, with significant growth in overseas revenues from products like mobile substations and charging stations [4][5]. Profit Forecast and Valuation - The profit forecasts for 2025-2027 have been adjusted downwards by 8.77%, 9.13%, and 8.54% respectively, with expected net profits of RMB 1.288 billion, RMB 1.655 billion, and RMB 1.940 billion [5][11]. - The report assigns a PE ratio of 20 times for 2026, reflecting the company's competitive edge in flexible direct current transmission, leading to a target price of RMB 32.40 [5][11].

Core Viewpoint - The company reported a mixed performance in the first half of 2025, with a decline in revenue but an increase in net profit, indicating resilience in profitability despite revenue challenges [3]. Group 1: Financial Performance - In the first half of 2025, the company achieved operating revenue of 6.447 billion yuan, a year-on-year decrease of 5.68%, while net profit attributable to shareholders was 634 million yuan, a year-on-year increase of 0.96% [3]. - The gross margin increased by 2.85 percentage points to 23.75%, and the net margin rose by 0.43 percentage points to 11.01% [3]. - For Q2 2025, the company reported operating revenue of 4.099 billion yuan, a year-on-year growth of 1.81%, and a net profit of 426 million yuan, reflecting a year-on-year increase of 9.12% and a quarter-on-quarter growth of 105.38% [3]. Group 2: Business Segments - The direct current transmission system business saw a significant revenue increase of 211.71% year-on-year to 460 million yuan, although the gross margin decreased by 10.74 percentage points to 40.76% [4]. - The smart distribution and transmission system revenue decreased by 13.01% to 1.847 billion yuan, while the gross margin increased by 3.81 percentage points to 26.93% [5]. - The smart electric meter revenue fell by 4.44% to 1.528 billion yuan, with a gross margin decline of 3.50 percentage points to 24.06% [5]. - The revenue from new energy and system integration dropped by 30.38% to 696 million yuan, but the gross margin improved by 4.11 percentage points to 10.61% [5]. - Revenue from charging and swapping equipment increased by 4.92% to 577 million yuan, with a gross margin rise of 2.79 percentage points to 15.23% [5]. Group 3: Market Trends and Opportunities - The investment in China's power grid is expected to accelerate the development of various business segments, with a 14.6% year-on-year increase in power grid project investment to 291.1 billion yuan in the first half of 2025 [5]. - The total investment from State Grid and Southern Grid is projected to exceed 800 billion yuan, indicating a robust outlook for the industry [5]. - The company is actively expanding its international market presence, with international business revenue growing by 72.68% year-on-year to 255 million yuan, and a gross margin increase of 3.82 percentage points to 25.29% [6].

Investment Rating - The report maintains a "Buy" rating for the company [8][6]. Core Views - The company has shown steady profit growth in Q2 2025, with revenue reaching 4.099 billion RMB, a year-on-year increase of 1.81% and a quarter-on-quarter increase of 74.56%. The net profit attributable to shareholders was 426 million RMB, up 9.12% year-on-year and 105.38% quarter-on-quarter [2]. - The company's gross margin has improved significantly, with a gross margin of 23.75% in H1 2025, an increase of 2.85 percentage points year-on-year, driven by a higher proportion of revenue from the more profitable DC transmission system business [3]. - The company is experiencing rapid growth in overseas markets, with overseas revenue increasing by 72.68% year-on-year, while domestic revenue decreased by 7.41% [4]. - The company's DC transmission system business revenue surged by 211.71% year-on-year, supported by ongoing high demand for UHV construction projects [5]. - The company is expected to achieve a compound annual growth rate (CAGR) of 22.57% in net profit from 2025 to 2027, with projected net profits of 1.412 billion RMB, 1.821 billion RMB, and 2.122 billion RMB for the respective years [6]. Summary by Sections Financial Performance - In H1 2025, the company achieved total revenue of 6.447 billion RMB, a year-on-year decrease of 5.68%, while net profit attributable to shareholders was 634 million RMB, up 0.96% year-on-year [3]. - The company generated a net cash flow from operating activities of 1.120 billion RMB in H1 2025, a significant increase of 237.08% year-on-year [3]. Market Position - The company maintains a leading position in the domestic market, with a first-place ranking in the national grid's electric meter bidding and an increase in market share in provincial bidding [4]. - The international market presence is expanding, with successful entries into markets in Saudi Arabia, Brazil, and Spain, among others [4]. Business Outlook - The report anticipates that the company's performance will continue to improve, with a target price of 26.41 RMB based on a 19x PE ratio for 2025, reflecting the company's competitive edge in the flexible DC transmission sector [6][8].