22Q4 gross margin increased 6.09 percent month-on-month. In 2022, the company achieved revenue of 2,335 million yuan, up 21.86% year on year; net profit was 114 million yuan, down 23.64% year on year; after deducting non-performance, it was 121 million yuan, up 4.45% year on year. In 2022, the company produced 72.3428 million square meters of various types of conveyor belts, an increase of 10.79% over the previous year, and sold 73.5412 million square meters of various types of conveyor belts, an increase of 16.24% over the previous year. The gross profit margin of 2022Q4 was 21.16%, an increase of 6.09 percentage points over the previous month; an increase of 9.06 percentage points over the previous year.

The net profit of 2022Q4 was 28.78 million yuan, up 7% month-on-month and 208% year-on-year.

The overall operation of the main downstream of the conveyor belt was stable in 2022. Although the five major industries of coal, ports, steel, cement, and thermal power are affected by various factors such as the economic situation, the overall operation is relatively stable. According to statistics released by the National Bureau of Statistics, in 2022, the total production of raw coal by industrial enterprises above scale reached 4.56 billion tons, an increase of 10.5% over the previous year; crude steel production in the steel industry was 10179.59 million tons, down 1.7% year on year; steel production was 134,03.35 million tons, up 0.3% year on year; cement production was 2.13 billion tons, down 10.5% year on year. According to data released by the Ministry of Transport, the port completed cargo throughput of 15.685 billion tons in 2022, an increase of 0.9% over the previous year. Due to the service life of conveyor belts and the huge scale of conveyor lines, replacement demand is its main market. Under the steady development of various downstream industries, market demand for conveyor belts has remained stable.

The company plans to exceed 150 million square meters of conveyor belt production capacity by the end of the 14th Five-Year Plan. Insist on strengthening the main conveyor belt business, and gradually expand from conveyor belt manufacturers to the field of overall material delivery system solutions, while expanding the old-age health industry. In the next few years, the company will increase investment in the main conveyor belt business and plan the intelligent construction of conveyor belt production lines. By the end of the 14th Five-Year Plan, the production capacity will exceed 150 million square meters, further increasing the market share of Shuangjian conveyor belts. Increase investment in R&D in technological innovation, further develop new products suited to market needs, and vigorously promote special-purpose products (new products such as ceramic interface conveyors, ropeway conveyors, tubular conveyors, flexible conveyors, etc.).

The 75 million square meter conveyor belt production capacity is expected to be launched one after another in 2023. The high-strength, energy-saving and environmentally friendly conveyor belt project with an annual output of 15 million square meters is expected to reach its intended use on June 30, 2023. Taisheng's production capacity of 60 million square meters is currently being planned. The company expects construction to begin in the second half of 2023 and partially put into operation by the end of 2023.

Profit forecasts and investment ratings. We expect the company's net profit of 2023-2025 to be 161 million yuan, 264 million yuan and 278 million yuan respectively. The corresponding EPS is 0.39, 0.64, and 0.67 yuan. The company will give the company 20 times PE in 2023, and the corresponding target price will be 7.80 yuan (based on 15 times PE in 2021, -40.91%). The handover coverage will maintain the “superior market” rating.

Risk warning. Risk of macroeconomic instability; risk of increased market competition; risk of fluctuations in raw material prices.