The company released its 2022 annual report and the first quarter report of 2023. The company's revenue in 2022 was 897 million yuan, an increase of 33.9%; the net profit of the mother was 100 million yuan, an increase of 14.6%; and EPS was 0.41 yuan, an increase of 13.8%. 2023Q1 revenue was 127 million yuan, a decrease of 44.3%; the net profit of the mother was 0.04 million yuan, a decrease of 87.5%. Market demand for earthquake reduction in buildings continues to expand, and the company is expected to be the first to benefit as a leading enterprise. Maintain the company's buying rating.

Key points to support ratings

23Q1 performance is under pressure: in 2022, the company achieved revenue of 897 million yuan, an increase of 33.9%; the net profit of the mother was 100 million yuan, an increase of 14.6% over the same period. Among them, 22Q4 achieved revenue of 244 million yuan, an increase of 16.0%; Guimu's net profit was 21 million yuan, an increase of 137.3%. 2023Q1's revenue was 127 million yuan, a decrease of 44.3%, and the net profit of the mother was 0.04 million yuan, a decrease of 87.5%. The performance of 2023Q1 companies declined significantly.

The company's gross margin increased slightly in 2022, and the cash flow was good: in 2022, the company's gross margin was 42.21%, an increase of 0.53 pct; the net interest rate returned to the mother was 11.17%, down 1.88pct. The gross margin of the 2023Q1 company was 37.37%, a decrease of 0.13pct; the net profit margin of the parent company was 3.20%, a decrease of 11.05pct. The company's net operating cash flow in 2022 was -38 million yuan, and the net outflow was drastically reduced by 79.2% year-on-year.

The net operating cash flow of 2023Q1 Company was -37 million yuan, and the net outflow increased slightly by 4.6% compared to 2022/Q1.

Sales of seismic isolation products increased, and the share of the market outside Yunnan Province continued to rise: in 2022, the company's sales volume of seismic isolation and shock absorption products changed 30.7% and -15.7%, respectively, and the decline in steel prices caused the gross margin of seismic isolation products to increase by 1.54 pct to 43.17%. In 2022, the company's revenue share in markets outside Yunnan Province reached 68.42%, an increase of 9.25 pct. The company's market development activities were very effective.

The building seismic mitigation market continues to expand, and leading companies will be the first to benefit: in 2021, the State Council issued the “Regulations on the Management of Seismic Resistance in Construction Projects”. The formal implementation of the “Regulations” will greatly increase the scope covered by mandatory policies, and demand in the earthquake mitigation market will expand markedly. As a leading enterprise in the building shock absorption industry and the only listed company in the A-share market whose main business is building earthquake dampening, Zhenan Technology is expected to benefit first as the scale of production capacity continues to expand and the production capacity layout is becoming more and more perfect.

valuations

The company's performance declined significantly in the first quarter, so we should adjust our profit forecasts. The company's revenue for 2023-2025 is estimated to be 1,43 billion, 22.22, and 3.37 billion yuan; net profit returned to the mother is 190, 3.1, and 50 billion yuan respectively; EPS is 0.76, 1.27, and 2.01 yuan respectively. Maintain the company's buying rating.

The main risks faced by ratings

The rise in raw material prices exceeded expectations, the implementation of the policy fell short of expectations, and the progress of capacity expansion fell short of expectations.