Event: October 28, 2023, the company released its third annual report for 2023. In the first three quarters of 2023, the company achieved operating income of 2,405 billion yuan, a year-on-year decrease of 6.07%, net profit of 119 million yuan, a year-on-year decrease of 57.67%, and net profit after deducting non-return mother of 13 million yuan, a year-on-year decrease of 47.80%. During the reporting period, the company achieved operating income of 756 million yuan, a year-on-year decrease of 18.26%, and net profit of 0.5 billion yuan, a year-on-year decrease of 77.91%.
Changes in the project product structure affected profit realization, and gross margin increased in a single quarter. In the first three quarters of 2023, the company achieved a total operating income of 2,405 billion yuan, a year-on-year decrease of 6.07%; a total net profit of 119 million yuan, a year-on-year decrease of 57.67%, mainly due to changes in project product structure, which affected profit realization. In terms of profit margin, in the first three quarters of 2023, the company's gross margin was 15.59%, up 0.54pp year on year, net profit margin was 1.02%, down 0.91 pp year on year; in a single quarter, 2023Q3 gross margin was 16.73%, up 3.07 pp year on year, up 3.75pp month on month, net profit margin was 0.83%, down 1.52pp year on year, down 2.06pp month on month. In terms of period rates, in the first three quarters of 2023, the company's sales/management/R&D/financial expenses were 3.54%/5.25%/4.71%/0.42% respectively, with year-on-year changes of +0.54pp/ +0.69pp/ -0.26pp/-0.33pp. Looking at the single quarter, 2023Q3, the sales/management/R&D/financial expenses rate was 3.98%/5.52%/5.08%/0.75%, respectively, year-on-year changes of +1.43 pp/ +2.84 pp/+1.69 pp/+ 0.56pp, the fee rate for the period has increased.
The company listed and transferred shares in Chenguang Futai to improve the efficiency of resource allocation. The company was listed and transferred 65% of Shenyang Chenguang Futai's shares on September 27, 2023. The holding subsidiary has lost money for two consecutive years, mainly to improve the quality of operations of listed companies, increase internal resource integration, and improve resource allocation efficiency, which is expected to continue to improve profitability.
The company has made phased progress in scientific and technological innovation, and the civilian industry has made positive breakthroughs. According to the company report, the company is focusing on the main business and promoting the implementation of 89 technological innovation projects under research. Some technological innovation projects have achieved phased progress and results. In the field of intelligent manufacturing, a key technology research project for a digital flexible assembly production line has been developed; in the field of nuclear equipment, the Hualong No. 1 reactor waste resin treatment key technology research project has completed process performance tests. Facing the country's major strategic needs, we actively carried out project planning and application, and organized and completed the “Ye Qisun” Science Foundation 2024 project guide requirements for 2 projects, including “Research on the mechanism of electrothermal coupling melting and cooling for a large area of high heat loads in a short period of time”; the “Dewar Expansion Joint Complete System for Thermonuclear Fusion” completed the first (set) major equipment certification in Jiangsu Province. The company's civil industry made a positive breakthrough. In the first half of 2023, the company's civil industry achieved revenue of 970 million yuan, an increase of 12.56% over the previous year; relying on favorable opportunities for the group company to sign a strategic cooperation agreement with the State Pipeline Network Group, it successfully signed 215 million yuan of non-standard equipment for the State Pipeline Network Group.
Investment suggestions: Our previous revenue forecast for the company for 2023/2024/2025 was 45.99/55.05/6.965 billion yuan, respectively, and the net profit forecast was 1.26/2.10/325 million yuan respectively. Due to changes in the project product structure, we lowered the company's profit forecast. 2023/2024/2025 revenue was 39.58/54.08/6.836 billion yuan, respectively, and net profit was 0.84/1.61/247 million yuan respectively. The corresponding PE was 64/33/ 22x, maintaining the “buy” rating.
Risk warning events: nuclear equipment orders fell short of expectations; military goods orders fell short of expectations; civilian goods business development fell short of expectations.