Revenue and net profit declined throughout the year. Revenue in 2022 was 2,618 billion yuan, -12.99% year on year. Net profit of the mother was 417 million yuan, or -33.94% year on year; after deducting net profit of the non-return mother was 149 million yuan, -66.12% year on year.
Among them, the fourth quarter was greatly affected by the epidemic, with revenue of 917 million yuan in the fourth quarter, -32.12% compared to the previous year; the net profit of returning to the mother and net profit after deducting the return of the mother were 231/69 million yuan respectively, -11.4%/-70.4% year-on-year respectively.
Gross margin declined due to increased investment in developing own industries. Gross margin in 2022 was 29.3%, compared to -7.7 pp compared to the previous year. The main factors behind the decline in gross margin include: 1) the increase in raw materials, labor and logistics costs in the new materials business sector; 2) the restructuring of the company's business structure and the reduction in revenue from the high-margin promotion service business.
The company's expenses increased compared to the same period last year. The company's expenses increased compared to the same period last year. Among them, the sales expenses ratio was +0.8pp to 4.1% over the same period last year; the management expenses ratio was +2.0pp to 11.7%; the R&D expenses rate was +1.5pp to 5.5%; and the financial expenses ratio was +1.2pp to 3.9% year-on-year. The sharp increase in financial expenses is mainly due to the increase in bank loans and medium-term notes in the reporting period compared to the same period last year, as well as the completion and acceptance of subsidiary park projects, and the costing of interest expenses. The long-term financial expense ratio will be kept at a lower level.
Due to rising costs and expenses, the profit side is under pressure. Net profit margin was 19.9%, year-on-year - 6.2 pp.
Net operating cash outflow decreased year over year, and the balance ratio was relatively stable. As of the end of the reporting period, net operating cash flow was -325 million yuan. Compared with the same period last year - 1,069 million yuan, the net outflow was reduced.
The balance ratio was 43.88%, +1.4pp compared to the same period last year, which remained stable.
Business segment: Digital economy business results have been shown, and science and technology innovation services have declined due to strategic adjustments. The new materials industry/innovation base platform service/technological innovation operation service/digital economy business achieved revenue of 16.53/7.16/135/72 billion yuan respectively, +5%/-30%/-59%/+60%, respectively. 1) The company's main new materials business related to cosmetic packaging grew steadily; 2) Innovation base platform service business revenue based on all types of space carriers covering “incubators - accelerators - industrial parks” declined year-on-year, related to the implementation of “three exemptions and three halving” incubation service fees and property rent for enterprises entering the park with their own properties under the pandemic; 3) The system promotion business in the science and technology innovation service sector declined significantly compared to the same period last year. The main reason was that the company made strategic adjustments to the promotion system to gradually adjust the promotion system benefits to innovative service cooperation+ industry development Model, seeking companies in various regions Long-term industrial development benefits; 4) Digital economy business revenue is mainly contributed by the technology company “Shuyun Science International” independently cultivated by the company. It mainly provides advanced government/enterprise/project-level building digital solutions for new smart cities, with a wide range of applications.
Risk warning: The progress of science and innovation business fell short of expectations; raw material prices fluctuated; investment returns fell short of expectations.
Investment advice: I am optimistic about the robustness of the company's traditional business and the gradual post-investment effects of science and innovation business. We lowered our profit forecast for the company. The net profit for 2023-2025 is estimated to be 580/686/825 million yuan respectively, an increase of 39.3%/18.3%/20.2% over the previous year. Maintain the “buy” rating and lower the reasonable valuation range to 9.60 to 10.56 yuan. The reasonable valuation corresponds to 20-22x PE in 2023.