Net profit surged in '23, maintaining a “buy” rating
Cathay Pacific Group announced its 2023 performance forecast. The company expects to achieve net profit of 287-331 million yuan in 23, an increase of 100.00%-130.00% over the previous year, and is expected to achieve a net profit of 2.5-299 billion yuan after deduction of non-net profit, an increase of 126.94%-165.25% over the previous year. We maintain our profit forecast. We expect the company to achieve net profit of 3.00/3.76/431 million yuan in 23-25, corresponding to PE 20/16/14X, respectively. Comparable to the 24-year Wind, the average PE was expected to be 16 times. Considering that the company is upgrading and iterating bombing products and expanding into non-explosive fields, building a collaborative development layout for the civilian explosion integration+rail transit automation and information+new military materials industry, the company was given a target PE of 12.60 yuan for 24 years (previous target price of 13.20 yuan), maintaining a “buy” rating.
After excluding the impact of the goodwill impairment of the subsidiary in '22, the company's net profit still achieved steady growth in '23. Taking into account the 202Q4 holding subsidiary Taige Era's goodwill impairment loss of 120 million yuan. After excluding this impact, the company's net profit to the mother grew by about +8.79% to +25.11% year-on-year in 2023. Looking at a single quarter, the company's 23Q4 net profit is expected to achieve 61.7776 million yuan - 105 million yuan. After excluding the influence of the 22Q4 subsidiary's goodwill calculation, the net profit growth rate for the 23Q4 single quarter was approximately - 2.67% to +65.25%, the month-on-month growth rate was about -36.64% to +7.59%.
Civil-explosion+civil-military integration has blossomed. According to the company's announcement, potassium perchlorate continues to develop new application areas. According to the company's announcement, the company's performance increased ahead of schedule in 2023. The company's electronic detonator business revenue and profit increased dramatically. At the same time, industrial explosives production and sales were booming, driving the company's integrated civilian explosion industry's business performance to grow steadily; 2) Benefiting from strict environmental protection policies in the potassium perchlorate industry, the company's production of potassium perchlorate was not affected. Simultaneous development suitable for military industry New products in the field and automotive airbags have achieved stable mass production, driving a sharp increase in the company's potassium perchlorate business revenue and net profit.
Deeply involved in the field of civil-military integration, future growth potential can be expected
The company, formerly known as an enterprise under the Jiangxi National Defense Science, Technology and Engineering Office, was deeply involved in the field of civil-military integration with the advantage of civilian explosion qualifications. The total number of provincial civil-military integration enterprises under the company reached 7. The wholly-owned subsidiary Xinyu Cathay Pacific is the largest manufacturer of military unmanned target aircraft rocket boosters in China; Yongning Technology is the leading manufacturer of potassium perchlorate; Tuohong New Materials and Mitsuishi Nonferrous Metals's main products are tantalum-niobium compounds, with an annual production capacity of 1,500 tons after full production in 2024; the holding subsidiary Aoke Xincai has second-level confidentiality qualifications for weapons equipment research and production units, and the products are used in special ammunition. Based on the further development of the company's existing business in the military industry, the performance of the civil-military integration sector during the “14th Five-Year Plan” period is expected to be further released.
Risk warning: raw material price fluctuation risk; production safety risk; policy change risk.