Brief performance review
On January 29, 2024, the company released its 23-year performance forecast. It is expected to achieve net profit of 83 million yuan to 100 million yuan, an increase of 60.92% to 93.88% over the previous year (calculated uniformly based on the data disclosed in the 22nd annual report); net profit after deducting non-return to mother is 0.45 million yuan to 60 million yuan, an increase of 85.15% to 146.87% year on year.
Management analysis
The company's state-owned enterprise reform has achieved remarkable results, and profits have increased dramatically: in January '23, a new round of state-owned enterprise reform proposed a “one profit and five rate” requirement. More indicators such as profitability and human efficiency were assessed. The company continued to push forward reforms in all three systems of personnel, labor, and distribution, and per capita income generation continued to improve. 1Q-3Q23 achieved a gross profit margin of 14.67%, up 0.8 pcts year on year; achieved a net profit margin of 1.67%, up 0.55 pcts year on year. By increasing market efforts and strictly controlling costs and expenses, the company achieved a significant year-on-year increase in orders for major products and revenue in 23 years, and profits improved significantly year-on-year.
Relevant officials of the State Assets Administration Commission proposed incorporating market value management into the performance assessments of central enterprise leaders, and the performance of companies with strong momentum in the state-owned enterprise reform is expected to continue to grow high: January 24, 24, the head of the State Council's State-owned Assets Administration Commission Property Administration proposed a study to include market value management in the performance assessment of central enterprise leaders to guide central enterprise leaders to pay more attention to the market performance of the listed companies they control; promptly convey confidence and stabilize expectations through the application of market-based holdings and repurchases, etc., to increase cash dividends and better return to investors. The quality of the company's subsequent operations is expected to be further improved. At the same time, the company has implemented an equity incentive plan and set high performance targets, and there is strong certainty that it will achieve high performance growth in the future.
Deepening cooperation with Sinopec, the company's hydrogen energy business has broad prospects for growth: the company has achieved an integrated solution layout for hydrogen production, hydrogenation, and hydrogen transportation; the hydrogen production process has completed the development of 500/2000 standard alkaline water hydrogen production and PEM hydrogen production equipment; the hydrogenation process has developed core products such as integrated compressors, hydrogenators, hydrogen discharge columns, and sequence control panels; and the hydrogen transmission process has developed three steel-grade pure hydrogen long-distance steel pipes. In January '24, the company signed the “Comprehensive Cooperation Framework Agreement” and the “PEM Electrolyzed Water Equipment Manufacturing Cooperation Agreement”. It is expected that cooperation with Sinopec and the research institutes within the Sinopec system will continue to be deepened in the future to achieve breakthroughs in technology research and development and industrialization around Sinopec's needs. Lead other companies in the field of hydrogen energy and create a “second curve” for the growth of the company's new energy business.
Profit Forecasts, Valuations, and Ratings
Adjusted to the company's profit forecast, the company is expected to achieve net profit of 0.9/147/250 million yuan from 23 to 25, respectively, corresponding to the current PE74X/46X/27X. Considering that the company's state-owned enterprise reforms are expected to drive high profit growth, the hydrogen energy business closely follows Sinopec's layout and has broad prospects for growth, maintaining a “buy” rating.
Risk warning
Oil companies' capital expenses fell short of expectations, hydrogen energy business development fell short of expectations, and state-owned enterprise reforms fell short of expectations.