Driven by the demand for applications such as 5G, industrial Internet, cloud computing, and artificial intelligence, the construction scale of data centers continues to expand.
Electricity is the largest cost of data centers, and the electricity consumption of data centers in mainland China will account for 3.3% of the total electricity consumption of the whole society in 2023. This power can be used to power 14,000 Three Gorges hydropower stations at full capacity at the same time.
In the cost of electricity, the cost of power generation equipment accounts for 90%. Therefore, data centers have extremely high requirements for the quality of power equipment. Sieyuan Electric, a leading enterprise in mainland power equipment, is also gradually providing power equipment for data centers.
So, what kind of enterprise is Sieyuan Electric?
Sieyuan Electric is one of the few manufacturers in the power transmission and distribution industry in China that has R&D, manufacturing and solutions for primary equipment (switches and coils), secondary equipment (reactive power compensation and intelligent equipment), power electronic equipment and other products.
From the perspective of the company's product revenue structure, more than 90% of Sieyuan Electric's revenue comes from primary and secondary equipment.
Sieyuan Electric has a wide range of products and continuous expansion of application scenarios, among which the revenue of primary equipment accounts for the highest proportion. In the first half of 2023, the company's switch products achieved revenue of 2.628 billion yuan, accounting for 49% of the annual revenue, and coil products achieved revenue of 1.121 billion yuan, accounting for 21% of the annual revenue.
From the perspective of the company's revenue structure at home and abroad, the proportion of Sieyuan Electric's overseas revenue has gradually increased.
Power infrastructure is the most active area of the Belt and Road Initiative, and the installed capacity demand in key areas along the Belt and Road continues to increase. More than half of the Belt and Road export companies are large power companies.
Through cooperation with PowerChina, China Energy Construction, Dongfang Electric, Shanghai Electric and other enterprises, Sieyuan Electric will achieve overseas revenue of 1.082 billion yuan in the first half of 2023, accounting for more than 20%. Two-thirds of them come from power construction in countries along the Belt and Road.
In addition, in the first half of 2023, the gross profit margin of Sieyuan Electric's overseas business will be as high as 32.3%, which is higher than that of TBEA and China XD in the same industry. This shows that the company has a high degree of recognition overseas and business development is smooth.
Of course, 80% of Sieyuan Electric's business comes from China, and the domestic market is the main driving force for the company's development.
On the one hand, the share of various bids won by Sieyuan Electric has increased steadily, and it continues to increase its market influence.
The three giants of mainland electrical equipment are Pinggao Group, Xidian Group, and Sieyuan Electric. Among them, Sieyuan Electric's share of winning bids for power transmission and transformation transformers will increase from 13.87% in 2022 to 15.78% in 2023, ranking first.
On the other hand, the continuous expansion of the scale of the mainland power market has also brought greater incremental space to Sieyuan Electric.
In 2023, the investment in the mainland power grid will reach 527.5 billion yuan, with a growth rate of 5.4%, and it is expected that the demand for electricity will continue to expand in the future with the vigorous construction of computing facilities such as artificial intelligence and data centers.
Sieyuan Electric's market share has gradually increased, and the market scale has been expanding, which has also steadily improved the company's performance and profitability.
Since its listing in 2004, Sieyuan Electric's performance has been very bright. In the past six years, the company's revenue growth has been very stable, with a compound annual growth rate of 21.43%, and its net profit has increased from 295 million yuan to 1.545 billion yuan.
As a typical manufacturing industry, the gross profit margin of relevant production enterprises in the industrial chain is generally about 25%, while the overall gross profit margin of Sieyuan Electric is about 30%, which is higher than the average gross profit margin of the industry.
It is worth noting that in 2022, although the interest rate of Sieyuan Electric will decline due to fluctuations in raw material prices and rising overseas freight rates, the decline in the overall net profit margin will be smaller than the gross profit margin.
This is mainly due to the continuous improvement of the efficiency of operation and management, the cost has been effectively controlled, and the profitability of the enterprise has been ensured.
In addition, the profitability of Sieyuan Electric is still improving. According to the performance forecast, the company will achieve a net profit of 284 million yuan to 393 million yuan in the first quarter of 2024, a year-on-year increase of 30% to 80%.
So, what are the factors that will support the company's future development?
1. The transformer market is in short supply, and the company's overseas products have increased revenue
Step-down transformers are needed for data center operation, but the current foreign market is facing a shortage of transformers.
By the end of 2023, the total investment in industrial reshoring in the United States reached 933 billion US dollars, and the demand for transformers continued to increase.
On the supply side, the lack of raw materials has caused a shortage of supply. Oriented silicon steel is one of the important raw materials for transformers, and there is a shortage of foreign oriented silicon steel, and it is difficult for enterprises to expand production, and the production capacity cannot meet the demand.
China's transformer products account for 67% of the global market, and the output of mainland-oriented silicon steel continues to increase, coupled with the continuous breakthrough of domestic transformer technology, related enterprises are expected to achieve long-term exports.
As a key domestic transformer manufacturer, Sieyuan Electric has benefited from the increase in market demand, and the company's overseas orders will account for more than 50% of the total transformer orders in 2023, achieving rapid growth.
The insufficient supply capacity of the entire industrial chain of transformers coupled with the increase in the difficulty of expanding production will not change the current supply and demand status in a certain period of time, and there is still a broad space for growth in Sieyuan Electric's overseas business.
2. Expand supercapacitor products and position in the field of automotive energy storage
In a low-carbon and zero-carbon environment, the market share of new energy vehicles in mainland China has increased significantly, reaching 34.7% in 2023. In 2024, the market size is expected to exceed 2 trillion yuan.
The continuous expansion of market share has gradually tightened the requirements for power batteries. With the advantages of high power density, wide operating temperature and long cycle life, supercapacitors have broad application prospects in the direction of automotive power supply.
In 2023, Sieyuan Electric will successfully seize the supercapacitor market through acquisitions. Sieyuan Electric currently holds 70.42% of the equity of Engel Carbon Energy. You must know that before this, 60%-70% of the projects in the automotive supercapacitor market were products using olegoline carbon energy.
In addition, the company's core leaders also play a vital role in the company's future development.
Dong Zengping, chairman of Sieyuan Electric, graduated from Shanghai Jiaotong University with a bachelor's degree in high voltage, and obtained an MBA from China Europe International Business School. It not only has technical reserves, but also has excellent management capabilities.
And the other main persons in charge also have a good academic foundation, and will continue to promote the healthy development of the company in the future.
summary
In general, Sieyuan Electric's performance has grown steadily in the past few years, and its profitability has been continuously strengthened. As a leader in domestic power equipment, under the leadership of the leadership, the company will have a large room for growth in the future with the continuous construction of data centers, the increase in overseas market demand, and the continuous layout of new energy vehicle capacitors.
The above analysis does not constitute specific investment advice. The stock market is risky, and investors need to be cautious.
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