Event description

The company released its mid-2023 report, with revenue of 1.347 billion yuan in the first half of the year, an increase of 127.02%, and a net profit of 87 million yuan, an increase of 150.58%.

Event comment

Performance will remain high and the economy may be maintained in the second half of the year. The revenue increased by 127.02% in the first half of 2023, mainly due to the good implementation and settlement of the projects contracted by the company, and the significant increase in revenue scale, considering that the seasonal income in the second half of the year was recognized or not lower than that in the first half of the year; the performance increased 150.58% faster than the income, mainly due to the decrease of 4pct to 6.53% in the same period.

The gross profit margin is basically stable, the cost rate has improved in an all-round way, and profitability remains high. The company's gradual improvement of the effectiveness of fine project management has been gradually verified. In the first half of 2023, the gross profit margin decreased from 1.21pct to 15.52%, and the expense rate during the period decreased from 4pct to 6.53%. The rates of sales, management, R & D and financial expenses were reduced by 0.51pct, 2.87pct, 0.51pct and 0.11pct to 0.74%, 5.42%, 0.8% and-0.43%, respectively. The net rate of return on exchange is basically the same as in the same period last year. The vested net interest rate increased by 0.61pct to 6.49%, and the non-vested net interest rate increased by 1.06pct to 6.2%.

The high growth of operation leads to the improvement of cash flow, and the accounts received in advance and contract liabilities point to the inflection point of performance. In the first half of the year, the company had a net inflow of operating cash of 205 million yuan, an increase of 69 million yuan over the same period last year, mainly due to the good quality of accounts receivable, an increase in collection compared with the same period last year, and tax rebates received by subsidiaries against VAT. The ratio of receipt and cash is the same as minus-82.3pct and-50.18pct to 103.05% and 74.2% respectively, mainly due to the advance payment received by major customers by 2022H1. As of 2023H1, the company held 362 million yuan of notes and accounts receivable, 509 million yuan of inventory and contract assets, up 85.84% and 21.54% respectively from the same period last year.

Payables, prepayments and contract liabilities increased by 72.43% and 76.23% respectively over the same period last year to 632 million yuan and 454 million yuan, respectively.

Orders are full on hand, and orders from major customers can be expected. By the beginning of April, according to the calculation of the company's newly signed major contract projects, the current order size of the company may exceed 4.7 billion yuan, more than twice the revenue size of 2022. In January and July of 2022, the company won the bid of Yingwei 1.28 billion and BASF 15-2 billion, laying the foundation for the high performance increase in 2023. In January 2023, BASF won another bid of US $5000 to US $65 million for the BASF modularization project, reflecting the company's competitive advantage in chemical manufacturing and the good cooperative relationship between BASF and the company. The company has been highly recognized by customers such as BASF, Honeywell International Inc, Keschuang, Dow Chemical, Invida, etc., and has won awards such as excellent service provider and outstanding contribution. Considering that by 2030, BASF will invest 10 billion euros to build an integrated base in Zhanjiang, and the company's orders will continue to grow.

In the medium to long term, module application permeability increase + "Belt and Road Initiative" opens the growth space. 1) the modular construction of the plant has the advantages of short construction period and saving resources, so it is expected to become a major trend of industrial construction: take the eight 150000-ton ethylene cracking furnaces undertaken by Petrochina as an example, compared with on-site installation, modularization has greatly improved efficiency in almost every link, saving personnel and facility costs, and the average construction cost per unit has been reduced by about 2.6 million. 2) the use scene of the industrial module is gradually expanding, and the company continues to expand new application scenarios (such as the upper module of the FPSO,YINSON floating production storage tanker); 3) the company has been mainly undertaking export orders for a long time, and with the continuous development of the "Belt and Road Initiative" initiative, it is expected to further undertake more orders. It is estimated that in 2025, the company will achieve an attributable net profit of 2.1 million yuan, 290 million and 13.1 times the corresponding share price of PE, respectively, maintaining a "buy" rating.

Risk hint

1. The investment of foreign-funded enterprises is lower than expected.

2. The price of raw materials fluctuates greatly.