Incident: The company released its 2023 annual report. The company achieved operating income of 559 million yuan, down 3.12% year on year, net profit attributable to parent was 21.644,400 yuan, up 5.39% year on year; non-net profit attributable to parent was 22.616,600 yuan, up 13.64% year on year.
Among them, in the second quarter of the year, the company achieved operating income of 352 million yuan, up 3.86% year on year, completed net profit of 19.43 million yuan, up 9.46% year on year, achieved net profit of 206.625 million yuan, up 22.47% year on year; net profit for return was in line with our expectations, and after deducting non-performance, it was better than our expectations.
The overall quality of operations has improved, and it is expected that the increase in profitability will still be sustainable. (1) Profitability increase: The company's gross profit margin in the first half of the year was 28.07%, up 2.17 percentage points from the previous year, which was the main driver of the increase in profitability. We determined that it mainly came from the increase in overseas business share with high gross margin and the decline in upstream costs. Considering that the company's historical gross margin center usually remained around 30%, it is expected that with the digestion of high-value upstream raw material inventories in 2022, there is still room for improvement in gross margin; (2) The company's sales, management, R&D, and financial expenses in the first half of the year were 8.76%, 10.74%, and 1.87%, respectively , -0.22%, year-on-year changes of +1.15, +1.50, -0.72, and -0.28 percentage points, respectively. We expect the expansion of sales and management expenses to be mainly due to the company's acceleration in the development of the Belt and Road market, which is a cost advance; (3) Improved cash flow:
The net cash flow generated by the company's operating activities in the first half of the year was 71,5748 million yuan, a significant improvement from the same period last year of -51.361 million yuan. The revenue ratio was 139.25%, an increase of 56.75 percentage points over the previous year.
The growth of active orders has been greatly accelerated, and the release of flexibility in subsequent performance can be expected. According to the semi-annual report, the total number of orders on hand at the end of the company's mid-term report was 3,593 billion yuan, an increase of 49% over the same period (the mid-year report of '22 was 2,415 billion yuan, a year-on-year growth rate of 17.49%) and 42% (the annual report of '22 was 2,531 billion yuan), implying a significant increase in the absolute value and growth rate of newly signed orders, greatly exceeding our previous expectations of 3 billion yuan. We believe this is mainly due to the acceleration of the Belt and Road strategy and the support of carbon-neutral and related electricity demand. Considering that the company's order confirmation cycle is generally 1-2 years, and that the current order size is about 2.7 times the company's annual revenue in 2022 (1,354 billion yuan), it is determined that the inflection point in the company's performance growth rate has reached, and the continued release of flexibility in the future is worth looking forward to.
A runner in the “New Industrial Revolution (AI) + New Energy Revolution”, the new elastic target of the Belt and Road. The company's downstream future development driving force is bound to three new trillion-level tracks (energy storage, green electricity hydrogen production, and AI) intertwined with the new industrial revolution and the new energy revolution. The potential space is huge. At the same time, a different view from the market is that we believe that the Belt and Road Initiative is not a thematic investment; grasping the correct way to open it is a new flexible racetrack with strong valuation digestion ability. The company's efforts overseas to enjoy the “downstream multiplier effect plus three strong improvement logic” are expected to become a new flexible target for the Belt and Road.
Profit forecast and valuation: Considering that the company's interim report revealed that the growth rate of orders in hand greatly exceeded our previous expectations, we determined that the inflection point of Seagull's performance growth had reached. We kept the company's profit forecast of 101 million yuan in 2023 unchanged, and raised the 2024-2025 profit forecast to 145 million yuan and 213 million yuan (originally 137 million yuan, 185 million yuan), corresponding to the PE of 2023-2025, 20 times, 14 times, and 10 times, maintaining the “buy” rating.
Risk warning: The carbon neutrality trend is slowing down, the Belt and Road initiative is being blocked, and the release of AI computing power falls short of expectations.