Performance growth for the full year of 2023 may be under pressure, and we are optimistic about the development of the intelligent manufacturing business in 2024
Due to limited external market growth and increased market competition, the company expects that the full-year extended merger and acquisition targets will be difficult to achieve, which will affect the completion of the annual performance targets set at the beginning of the year. However, the company achieved a breakthrough in contract amounts for the three types of soil business and cement business, and financial expenses are expected to decline after the issuance of convertible bonds. We maintained the company's net profit of 277/3.51/429 million yuan from 2023-2025. Referring to the comparable company Wind in 2024, the average PE value was 22x. Considering that the company's ROE industry is leading but there is still some pressure on future growth in construction engineering inspection, the company was given 28xPE in '24, maintaining a target price of 12.24 yuan, and a “buy” rating.
The Ministry of Industry and Information Technology is undergoing inspection of the dual carbon platform, and the number of extended M&A projects is not as good as expected
The dual-carbon platform of the Ministry of Industry and Information Technology, which the company took the lead, completed the implementation period of the plan on June 30, 2023. It is currently in the inspection process, and the project inspection meeting has already been held. Outdated mergers and acquisitions in 2023 fell short of expectations, mainly due to 1) being affected by the external economic situation, the expectations and valuations of M&A targets changed significantly, leading to an extension of the cooperation cycle; 2) Coordinating existing legal entities to reduce the relationship with new extended mergers and acquisitions took time.
The company will continue to optimize internal management and processes, actively resolve resistance to external mergers and acquisitions, continue to promote cross-regional and cross-field extension mergers and acquisitions strategies, and strive to achieve epitaxial mergers and acquisitions revenue of 1-2 billion yuan and total profit of 20-30 million yuan in 2024.
The contract amount for the soil triplication business exceeded expectations at the beginning of the year. The intelligent manufacturing sector in 2024 may bring growth. As of November 2023, the company's soil triplex business has achieved a contract amount of about 150 million yuan, exceeding the 100 million yuan forecast at the beginning of the year. However, the company expects that most of the revenue will be confirmed in 2024, and the company will continue to focus on promoting this business. The cement business in the intelligent manufacturing sector has achieved a breakthrough. Since 2023, Shanghai Minofo has actively expanded the cement market and won bids for large-scale cement enterprise automation projects such as Qilianshan Cement and Southern Cement. 1-9M23 achieved a contract amount of about 240 million yuan, +92% over the same period last year. In addition to the continuous release of projects in the steel sector and the continued expansion of business in the cement industry, the company will continue to increase its development efforts in other process industries such as glass fiber and smart mining projects. The intelligent transformation of the cement industry and the development of overall intelligent manufacturing business are expected to help the company's performance grow.
The target price is 12.24 yuan, maintaining the “buy” rating
We expect the company to return net profit of 277/3.51/429 million yuan in 23-25 million yuan, EPS of 0.35/0.44/0.53 yuan, giving a 24-year target of 28 xPE and a target price of 12.24 yuan to maintain the “buy” rating.
Risk warning: The acquisition progress and integration capacity fell short of expectations, and the cost reduction fell short of expectations.