New orders signed in '22 were +40% year on year, and net profit of 23Q1 was +18.1% year on year. The company released annual and quarterly reports. In 2022, revenue was 2.70 billion, +24.4% year on year, and net profit of 169 million yuan, +4.5% year on year, lower than our expectations (219 million), mainly due to the impact of the 22Q4 epidemic on revenue growth, +3.6% year on year. At the same time, R&D and impairment expenses increased a lot, leading to a large increase in R&D and impairment expenses. 23Q1 achieved net revenue/return profit of 427/34 million, +10.7%/18.1% year on year. The company's new orders signed in '22 were +40% compared to the same period. Considering the impact of order execution in '22, we expect net profit to be 2.36/319/415 million in 23-25 (previous value of 312/435 million in 23-24). Comparable to the company's Wind 23, the company's industry sentiment was higher than comparable. The company's net profit CAGR for 22-24 was about 25.46%. The company was approved for 1.3xPEG in '23, the target price was 15.26 yuan (previous value 21.44) Yuan), maintaining the “buy” rating.

Design consulting grew steadily, and mechanical and electrical engineering expanded smoothly. Since 22Q4, gross margin has steadily recovered by industry. In '22, grain and oil processing/cold chain logistics revenue was 2,18/490 million, +29.9%/6.0% year on year, gross profit margin 18.0%/31.2% year on year, -1.1/+1.1pct year on year. By business, design consulting/mechatronic engineering/equipment manufacturing/engineering contracting revenue was 6.0/10.9/69/240 million, +13%/+24%/+100%/-27%, gross profit margin 43.8%/14.8%/12.5%/7.7%, year-on-year +0.8/+1.1/-7.7/+4.2pct. The share of engineering contracts decreased, mechanical and electrical engineering expanded smoothly. Equipment manufacturing was affected by insufficient capacity utilization of new investments, and mergers and acquisitions companies were in the management integration stage, and gross margin declined a lot. The company's overall gross profit margin in '22 was 20.7%, -0.69pct over the previous year, and the 22Q4/23Q1 gross profit margin was 23.2%/23.6%, and +3.5/+3.9pct over the previous year.

The increase in R&D and impairment in '22 dragged down the net interest rate. The dividend ratio increased significantly from -0.03pct to 10.6% year-on-year in '22. Among them, the sales/management/R&D/financial expenses ratio was +0.13/-0.49/+0.48/-0.15pct, respectively, and R&D expenses were +40.2% compared to the same period last year, mainly due to the company increasing investment in R&D and innovation. Impairment expenses in '22 were +62.6% year on year, accounting for +0.56 pct to 2.37% of revenue year over year. Under the combined influence, net interest rate returned to the mother in '22 was 6.3%, and -1.19pct year on year. The fee rate for the 23Q1 period was -1.31pct to 14.0% year-on-year, and the net interest rate to the mother was 7.9%, +0.50pct year-on-year, and +1.16pct month-on-month. The company's net cash flow from operating activities in '22 was 130 million yuan over the previous year, mainly due to business growth, which led to a large increase in equipment and raw material procurement expenses. The payment/payout ratio was 94.0%/88.6%, and the year-on-year ratio was -20.7/-6.2 pct. The 22-year dividend ratio increased 13.1 pct to 60.7% compared to '21.

Orders in '22 increased significantly, with mechanical and electrical engineering +94% year on year, cold chain logistics +67% year on year, 3.94 billion new orders signed in '22, +39.6%, of which design consulting/mechanical and electrical engineering/equipment manufacturing/engineering contracting was 8.2/21.5/64/30,000,000, +9.3%/+93.8%/+1.7%/-3.1% year on year. By industry, grain and oil processing/cold chain logistics signed 3.17/750 million new contracts respectively, +34.2%/+66.8% year on year. We believe that during the “14th Five-Year Plan” period, the company is expected to continue to benefit from the favorable boom in the grain, oil, and cold chain logistics fields. Combined with its own design consulting and continuous improvement in the conversion rate to mechanical and electrical engineering, high performance growth can be expected.

Risk warning: Investment in the grain and oil sector fell short of expectations; the conversion rate from design to mechanical and electrical engineering fell short of expectations.