High-end supplier of pressure vessels, with complete business qualifications: Sichuan Kexin Electromechanical was founded in 1997. Its main products are pressure vessel process equipment, including heavy vessels, large reactors, large heat exchangers, large towers, nuclear power transport containers, and other nuclear chemical military equipment. The products are widely used in the supporting construction of downstream enterprises in refining, chemicals, electricity, metallurgy, new energy, new materials, etc. The company has complete qualifications, and has civil nuclear safety level 2 and 3 mechanical equipment manufacturing licenses, first-class radioactive material transport container manufacturing licenses, fixed pressure vessel rule design qualifications, large pressure vessel (A1) manufacturing (including on-site manufacturing) licenses, GC1 pressure pipe installation qualifications, and US ASME U and U2 product design and manufacturing qualifications.

2023 performance is expected to grow rapidly: On January 19, 2024, the company released the 2023 performance forecast. Net profit to mother is estimated to be about 156 million yuan to 165 million yuan, up 28.69% to 36.11% year on year; after deducting non-net profit of about 149 million yuan to 158 million yuan, an increase of 34.70% to 42.83% year on year. It is estimated that 4Q2023 will achieve net profit of 200 million yuan to 29 million yuan, after deducting non-net profit of about 15 million yuan to 024 million yuan. The gross margin and period expenses level in 2023 are roughly the same as in 2022.

New orders for traditional chemicals are rising steadily: in 2023, the company's new orders continued to grow steadily. Among the new orders received, natural gas chemicals and petroleum refining account for a relatively large share. In terms of petroleum refining and chemical engineering, there are many expansion and transformation projects. Most of the new petrochemical orders come from large old customers, which shows the company's strong technical capabilities and continuous service capabilities. In terms of natural gas chemistry, it is expected that some replacement space will be created as the urea production line put into service in the early stages in China approaches. The company actively participated in the manufacture of key equipment for major projects involving the efficient use of low-grade coal for hydrogen production and concentrated urea-based compound fertilizer. At the same time, gas chemical high-pressure core equipment was exported through major projects of international engineering companies, which increased significantly over the previous year. In terms of coal chemistry, coal chemicals require clean utilization. There will be a further incremental market in the next 2-3 years, and the 2023H1 has successfully delivered the first large-scale gasification core equipment gasifier.

Engaged in the field of nuclear power production for more than ten years, nuclear power orders have gradually increased: the company has been engaged in nuclear power production activities for more than ten years, has rich experience, and related products have been continuously recognized by customers. At present, mass production of new fuel transport containers has been achieved, and the market share is high. The company has multiple manufacturing licenses in the nuclear field. Nuclear power orders have continued to grow in recent years. It undertook the localization of ANT-12A new fuel nuclear power transport containers for the CGN Group project, signed a new equipment contract for the CX project for high-temperature air-cooled reactors, and added production of other devices. The introduction and use of the ANT-12A new fuel nuclear power transport container has broken the foreign market monopoly on China's new fuel transportation equipment and solved the problem of foreign “stuck neck” of similar equipment in China. With the continuous development of the country's nuclear power industry, the nuclear power business is expected to gradually expand in the future.

Strategically adjust business and promote the hydrogen energy sector in an orderly manner: In the context of the rapid increase in silicon manufacturers and market supply exceeding demand, on the one hand, the company actively adjusted its marketing strategy in stages, reduced related orders, and on the other hand maintained its superior ability to obtain core orders, and undertook the core towers, heat exchangers, and reactors of Wanhua Chemical Group's Yantai, Sichuan, Ningxia, Fujian and Ningbo bases. At the same time, the company attaches great importance to the field of hydrogen energy and is promoting a number of R&D projects in an orderly manner. By raising capital, we will invest in the construction of hydrogen energy and specialty materials research and development centers. With the rapid increase in hydrogen energy application scenarios, hydrogen energy is expected to continue to empower the company's development in the future.

Investment advice: We expect the company to achieve revenue of 1,495, 18.01, and 2,169 billion yuan respectively in 2023-2025, and achieve net profit of 1.61, 1.98, and 238 million yuan, corresponding PE of 18.57/15.11/12.57 times, respectively. Covered for the first time, giving it a “Recommended” rating.

Risk warning: risk of macroeconomic fluctuations, risk of increased costs due to fluctuations in raw material prices, risk of project implementation, risk of technological innovation and application, risk of industry policy changes.