The company released the 2023 semi-annual report: 2023H1 achieved revenue of 2,423 billion yuan, up 29.76% year on year; realized net profit of 336 million yuan, up 78.04% year on year; net profit after deduction of net profit of 352 million yuan, up 86.30% year on year; basic earnings per share of 0.45 yuan, up 80.00% year on year; and weighted average return on net assets of 9.80%, up 3.57pct year on year. On a quarterly basis, the company achieved revenue of 1,092 billion yuan (+17.17%, -1.26%, same below) and 1,331 billion yuan (+42.31%, +21.92%) in Q1 and Q2 in 2023, respectively; net profit of 98 million yuan (+44.01%, -17.80%) and 238 million yuan (+97.23%, +142.82%), respectively.
Orders are growing rapidly, and high-end valves continue to break through: Benefiting from strong global oil and gas investment, the company's order growth rate has been high since this year. According to the announcement, in January-August, the company added a total of 4.42 billion yuan in orders, an increase of 42% over the previous year.
The company's high-end valves continue to break through. In 2023, the company successfully broke through the 24-inch 2500LB emergency shut-off valve; the BDO device's ultra-high pressure stop valve has been successfully delivered to many domestic customers; the 96-inch 300LB high-temperature three-eccentric butterfly valve has been successfully delivered, filling the domestic gap; the liquid hydrogen valve has achieved breakthroughs in R&D and orders; and the nuclear grade miniaturization stop valve project has been successfully implemented. In addition, Neway Petroleum Equipment's ultra-high pressure automatic control valves have provided a number of large caliber ultra-high pressure hydraulic and pneumatic gate valves and their control systems for a well-known FPSO project in Brazil. Currently, the first and second batches of products have been witnessed by customers and successfully delivered; the 140Mpa shale gas fracturing valves developed and produced independently have been successfully applied in many shale gas fracturing projects.
Profitability optimization and cost control improvement: 2023H1's overall gross margin was 29.70%, up 1.79pct year on year; net profit margin was 13.89%, up 3.77pct year on year. The total period expenses of the 2023H1 company were 271 million yuan, up 4.40% year on year, the period rate was 11.20%, down 2.72 pct from the previous year, of which the sales rate was 7.62%, the year-on-year decrease of 0.30 pct; the management fee rate was 3.46%, the same period in 2022 was -0.46 million yuan, accounting for -2.59% of operating income, a year-on-year decrease of 0.15 pct, of which exchange revenue was 68,886 million yuan, up 23.95% year on year; R&D rate 2.70 %, a year-on-year decrease of 1.78 pct.
2023Q2, the company's gross profit margin was 30.57%, up 2.11pct year on year, up 1.93pct month on month; net profit margin was 17.91%, up 4.99 pct year on year, up 8.92 pct month on month.
Inventories increased markedly, and operating cash flow declined sharply: net cash flow from operating activities of 2023H1 companies was 173 million yuan, a year-on-year decrease of 48.32%, mainly due to an increase in cash outflow from purchasing goods; net cash flow from investment activities - 37 million yuan, compared with -267 million yuan in the same period last year; net cash flow from fund-raising activities was 128 million yuan, a decrease of 56.51% year on year. As of the end of June 2023, the company's accounts receivable, notes receivable, and receivable financing totaled 1,970 billion yuan, up 19.23% year on year; inventory was 2,461 billion yuan, up 47.38% year on year. The company's accounts receivable turnover ratio was 1.33 times, an increase of 0.15 times over the previous year, and the inventory turnover ratio was 0.71 times, a decrease of 0.05 times over the previous year.
We have adjusted our profit forecast. We expect the company to achieve net profit of 6.8/76/950 million yuan in 2023-2025, corresponding to the closing price of PE on September 27, 2023, 16.6/14.9/12.0 times, maintaining the “increase in holdings” rating.
Risk warning: Cyclical fluctuations in the traditional energy industry; risk of exchange rate fluctuations; increased industry competition.