Incidents:
On August 28, Shijing Technology released its 2023 annual report: the company achieved operating income of 1,332 billion yuan in the first half of 2023, an increase of 98.12% over the previous year; realized net profit of 103 million yuan, an increase of 153.50% over the previous year.
Key points of investment:
Revenue from process pollution prevention and control equipment increased sharply year on year. In the first half of 2023, the company's manufacturing process pollution prevention and control equipment achieved revenue of 1,238 million yuan, an increase of 99.07% over the previous year. As of August 28, 2023, the company announced that the winning bid amount exceeded 4.2 billion yuan that year. While continuing its competitive advantage in the photovoltaic field, it also expanded customers in the pharmaceutical and other industries and broadened the scope of application of LCR technology.
Carbon capture and resource utilization projects are being promoted in an orderly manner. The company uses non-carbon raw materials such as steel slag to capture flue gas CO2 in situ at low cost, mix carbon slag with other materials such as ore powder, fly ash, etc., to prepare ultra-fine, high-activity, high-quality composite ore powder, and produce low-carbon gelling materials (used to produce low-carbon cement), concrete admixtures to replace concrete, and artificial aggregates. The company has signed a 20-year cooperation agreement with Jiyuan Zhonglian, and has also signed a “Strategic Cooperation Agreement” with Science and Technology Innovation Group, Jigang Group, Jiyuan Zhonglian, and Qinbei Power Generation. The carbon capture resource project is being promoted in an orderly manner.
Management expenses have increased dramatically, and net interest rates have increased year-on-year. In the first half of 2023, with the rapid growth of the company's business scale, personnel and equity incentive expenses increased dramatically. The company's management expenses were 91 million yuan, an increase of 133.81% over the previous year. The company's sales expense ratio, management expense ratio, and financial expense ratio were 2.08%, 6.85%, and 2.26% respectively, with year-on-year changes of -1.58pct/+1.04pct/-0.34 pct, respectively. The company's overall gross margin was 26.80%, up 1.69 pct year on year; net margin was 7.69%, up 1.87 pct year on year.
Profit forecasts and investment ratings Given the company's high reported performance and sufficient orders on hand, we expect the company's gross profit for 2023/2024/2025 to be 319/10.56/1,396 million yuan respectively, corresponding to PE 22/7/5 times, and maintain the “buy” rating.
Risks indicate the risk of capital shortage/tight funding; construction progress of new projects falls short of expectations; increased competition in the photovoltaic sector risks; company performance growth falls short of expectations; PV capacity growth falls short of expectations; and accounts receivable risk.