Event: in the first half of 2023, the company achieved operating income of 1 billion yuan, year-on-year + 66%; net profit of 224 million yuan, + 100% year-on-year. In the second quarter alone, the company realized operating income of 427 million yuan, + 28% compared with the same period last year, and net profit of 85 million yuan, + 30% of the same period last year. Taking into account the seasonal fluctuations in the project settlement delivery cycle and the high base in the same period last year, the overall performance of 23Q2 is basically in line with expectations.
The single-quarter profit of 23Q2 is at a historically high level, and the new signing of 23H1 is higher than the same period last year: 23Q2 revenue and profits are both historically high. Inventory (mainly finished goods) is-12.91% year-on-year and-6.9% month-on-month, indicating that Q2 company is in the destocking stage. Combined with the delayed delivery of 23Q1 performance, we tend to think that 23Q2 has reached the profit maximum corresponding to the original production capacity in a single quarter.
As high-speed rail fasteners gradually reach age, the stock renewal market will gradually start, and downstream demand will usher in expansion; the general trend of China's high-speed rail going out to sea will also bring an incremental market. The total amount of new contracts signed by 23H1 is 710 million yuan, + 180.42% compared with the same period last year. With the expansion of the market and the launch of the company's new production capacity (the annual production of 18 million pieces of high-speed rail equipment and accessories project is expected to be available), it is judged that the company will usher in a new stage of development.
Profitability is high, minority shareholders' profits and losses have significantly increased, and operating cash flow has greatly improved: 23H1's comprehensive gross profit margin is 43.3%, year-on-year + 7.2pcts; expense rate during the sales period is 11.6%, year-on-year-1.8pcts; net profit margin is 27.4%, year-on-year + 6.3pcts. 23Q2's comprehensive gross profit margin is 43.5%, year-on-year + 7.1pcts, net profit margin 26.4pcts, year-on-year + 3.9pcts. The profitability in the second quarter is at an all-time high, but the net interest rate has decreased, which is mainly affected by the profit and loss of minority shareholders.
In the second quarter alone, the profit and loss of minority shareholders of the company was 27.74 million yuan, + 180% year-on-year and + 24% compared with the same period last year; the increase in profit and loss of minority shareholders was mainly due to the growth of revenue and net profit of its holding subsidiaries Hebei Tieke Yichen and Tieke Tengyue; Tieke Yichen and Tieke Tengyue are mainly suppliers of fastener materials, and their products are also sold to the outside world; the growth of the performance of the holding subsidiary also indicates the marginal improvement of the overall demand of the industry.
The net inflow of operating cash flow of 23H1 Company was 246 million yuan, + 110% compared with the same period last year, and the net inflow of operating cash flow of 23Q2 was 158 million yuan, + 188% year-on-year. Fasteners as the core accessories of high-speed rail, the payment is timely.
Earnings forecast, valuation and rating: with reference to the historical quarterly performance level and the current situation of the elimination of finished goods inventory, it is judged that the performance in the second quarter has been in the extreme state under the original capacity scenario. With the continuous expansion of downstream market demand (stock renewal and high-speed rail going out to sea), as well as the launch of new capacity, it is judged that the company will usher in a new stage of development. Raise the 23-25 EPS forecast to 1.82 yuan (10.3% increase) / 2.31 yuan (16.1% increase) / 2.88 yuan (16.5% increase) respectively, maintaining the "buy" rating.
Risk hint: domestic high-speed rail construction is not as expected, high-speed rail inventory track maintenance and updating is not as expected, overseas demand release is not as expected.