ZEYU INTELLIGENT(301179)：A ONE-STOP ELECTRIC POWER INFORMATIZATION SYSTEM INTEGRATOR

　　Core views:
　　Zeyu has an in-depth presence in system integration for electric power informatization in Jiangsu Province with the ability to provide one-stop services. The new power system has a prominent feature of intelligent integration, which leads to high demand for network and application integration. Zeyu is also venturing into new businesses such as intelligent inspection and distributed photovoltaics (PV) while seeking market expansion for system integration beyond Jiangsu Province, which bodes well for its continuous growth. We forecast the Company’s 2022E/23E/24E attributable net profit (ANP) to be Rmb230mn/325mn/430mn, implying a CAGR of 32%. We assign a target price of Rmb59.00 on 24x 2023E PE and initiate coverage with a "BUY" rating.
　　Abstract:
　　A one-stop smart grid vendor with an in-depth presence in Jiangsu.
　　Starting with an in-depth presence in the electric power informatization market in Jiangsu Province, Zeyu has gradually extended its business based on electric power system integration. Till now, Zeyu has achieved a full presence across the value chain in "electric power design - system integration - construction & maintenance" with the ability to provide one-stop services. Its revenue and net profit CAGR both exceeded 30% from 2018 to 2021. By the end of 3Q22, the actual controller ZHANG Jian holds 56.5% of its shares.
　　Power system upgrading and transformation are expanding data transmission and application demand.
　　In 2018, domestic power informatization investment was about Rmb80bn, maintaining a CAGR of about 20% for several years and beating the investment growth rate of the broader power industry. It is necessary for the new power system to build information network support on the basis of the energy grid, and the different links of the power system need to be capable of dynamically adjusting real-time response based on instant information, finally strengthening the power supply guarantee and improving the dispatch speed. We expect the demand for electric power informatization to increase along with the accelerating construction of the new power system.
　　System integration profitability will continue to improve with an edge in technology and experience.
　　Zeyu has deep ties with ZTE for upstream equipment procurement and provides services to downstream users including the headquarters of the State Grid Corporation of China (SGCC) and its provincial companies. The relationship between Zeyu and upstream and downstream links is extremely stable. The Company's gross profit margin (GPM) of system integration has increased steadily, and some other profitability indicators are higher than the industry average level. Besides, Zeyu has been committed to the innovation and development of new products. We believe the Company can consolidate its competitive advantages on the back of its high-quality system integration products and its prospective development of new-generation system integration products, thus seizing industry-wide opportunities to achieve revenue and profit expansion.
　　Innovation and expansion will broaden growth headroom.
　　Following the industry trend, Zeyu has been tilting its resources toward application integration. At the beginning of 2023, Zeyu announced to invest Rmb160mn to set up a joint venture focusing on intelligent robots, seeking to promote business upgrading starting with power inspection robots. Zeyu's industrial and commercial distributed PV projects have been implemented, and we estimate the corresponding installed capacity will reach 300MW in 2023. Jiangsu Province, where Zeyu has an in-depth presence, has a high degree of electric power informatization. We expect Zeyu to expand to other provinces by virtue of technology and experience accumulation within Jiangsu Province, where it has achieved initial results, and market expansion beyond Jiangsu Province is becoming a new growth driver.
　　Potential risks: Disappointing grid operator investment in electric power informatization; increasing market competition; the Company's innovative product and market development missing expectations; the Company's market expansion beyond Jiangsu Province not up to expectations.
　　Investment recommendation: We expect Zeyu to report 2022E/23E/24E ANP of Rmb230mn/325mn/430mn (+23%/+42%/+32% YoY), corresponding to EPS forecast of Rmb1.74/2.47/3.26 and 29x/20x/15x 2022E/23E/24E PE at the current price. Factoring in the valuation of 20x 2023E PE (based on Wind consensus estimates) for comparable peers in the electric power informatization field, including Nari Technology (600406.SH), Dongfang Electronics (000682.SZ), Suwen Electric Energy (300982.SZ) and Zhiyang Innovation Technology (688191.SH), and considering the Company's high return on equity (ROE), advantages in its one-stop service model, and potential growth in new fields and regions, we give a 20% premium in valuation and assign 24x 2023E PE to derive a target price of Rmb59.00 for the Company and initiate coverage with a "BUY" rating.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。