Incident: The company released its 2023 mid-year report. In the first half of 2023, it achieved revenue of 330 million yuan, a year-on-year decrease of 23.21%, net profit of 14.87 million yuan, a year-on-year decrease of 72.79%, net profit of 12.8 million yuan, a year-on-year decrease of 77.47%. In the second quarter of 2023, the company achieved revenue of 200 million yuan, a year-on-year increase of 0.56%, net profit of 10.8 million yuan, a year-on-year decrease of 51.11%, net profit of non-homed income of 9.42 million yuan, a year-on-year decrease of 61.24%.
Comment:
Revenue picked up in 23Q2, and South China's performance was relatively good. The company's 23Q1-Q2 revenue fluctuated -44.29% and 0.56% year-on-year. Revenue in the second quarter clearly picked up. Individual customer requests for deferred delivery and slow demand in the first quarter led to a 23.21% year-on-year decline in revenue in the first half of the year. Looking at the subregion, South China performed brilliantly, achieving revenue of 83.78 million yuan, which was basically the same year-on-year. Revenue from southwest China was 130 million yuan, down 10.53% year on year, better than the market. Revenue from northwest China fell 53.08% year on year, a large margin; by product 17.20%, 34.84% As of 2023.630, the company's inventory was 360 million yuan, mainly due to the large amount of contracts signed and unexecuted. We believe that after downstream demand picks up and speeds up the pace of delivery, the company's revenue is expected to grow rapidly.
Q2 Gross margin has rebounded markedly. 2023H1's gross margin for seismic isolation and shock absorption changed from -3.36 pct, -0.89 pct to 39.46% and 39.27%, respectively, and remained at a high level; 2023Q2's comprehensive gross margin increased by 4 pct to 41.4% month-on-month, a significant improvement.
The “Regulations on the Administration of Seismic Resistance in Construction Projects” have been implemented, the market space has been greatly expanded, and it is time for the company's production capacity to expand.
On September 1, 2021, the “Regulations on the Administration of Seismic Resistance in Construction Projects” were officially implemented. The regulations require specific projects located in high-intensity fortified areas and key earthquake monitoring and defense zones to use seismic isolation and shock absorption technology. According to the company's 2023 mid-year report, after the policy was implemented, the application of seismic isolation technology in domestic schools, hospitals and other public buildings increased significantly in the industry market space. We think the time is right for the company to expand its production capacity significantly after listing.
Maintain a “better than market” rating. Seismic isolation is an emerging industry. As social awareness deepens, economic benefits become apparent, and policies continue to be promoted, industry capacity is growing rapidly, and it is time for the company's production capacity to expand dramatically.
We expect the company's revenue from 2023 to 2025 to be 882, 11.46 and 1,490 billion yuan respectively, and net profit to be 1.06, 1.41, 190 million yuan, and corresponding EPS of about 0.43, 0.57, and 0.77 yuan/share, respectively. Given the company's strong growth, we maintain the company's PE 50-60 times in 2023, with a reasonable value range of 21.50-25.80 yuan, corresponding to the company's PB 3.1 to 3.8 times in 2023, maintaining the “superior to market” rating.
Risk warning. Market expansion fell short of expectations, and there was excess additional production capacity.