The company's earnings report showed net profit of +41% year over year, exceeding the maximum performance forecast. The company released the 2023 performance report: it is expected to achieve operating income of 808 million yuan in 2023 (the performance forecast range is 75-850 million yuan), +47.39% year over year; net profit attributable to mother of 93.24 million yuan (performance forecast range of 80-86 million yuan), +40.79% year-on-year, after deducting net profit not attributable to mother of 75.98 million yuan, +36.27% year over year. According to the company's performance report and the increase in stock business revenue due to future “additional savings”, we raised the company's net profit to mother. We expect net profit to be 0.93/1.60/220 million yuan for 23-25 (previous value: 0.884/1.55/ 212 million yuan), which is 36/21/15 times PE for 23-25. Comparable to the company's 24-year PE average, is 21 times higher. Considering the scarcity of the company as the first A-share listed company for heavy metal pollution prevention and control in China and the broad market for non-ferrous heavy metal pollution prevention and control, the company was given 29 times PE in 24 years, corresponding to a target price of 48.72 yuan (previous value 42.38 yuan), maintaining a “buy” rating.
The solution business and product sales are growing rapidly, and we expect a sharp increase in the business performance of the “incremental storage” company. The main influencing factors: first, due to the increase in the brand effect of the company after listing, the comprehensive heavy metal pollution prevention and control solution business and product sales business grew rapidly; second, the company implemented marketing system reforms, optimized resource allocation, and further implemented team marketing strategies, mobilized the enthusiasm of marketers, improved business promotion efficiency, and helped business growth from a systemic perspective. By business, the company's comprehensive solutions business for heavy metal pollution prevention and control increased by 85.54% year on year, and product sales business increased by 64.29% year on year. The solution business is mainly an EPC engineering business, which is an incremental business, and is expected to continuously generate revenue from operation and maintenance and pharmaceutical products in the next few years after customer acceptance. We believe that the high growth rate of the company's solution revenue is beneficial to the company's subsequent expansion of existing business.
It is proposed to acquire Zijin Pharmaceutical, enrich the product structure in the non-ferrous field, and increase future profits. Copper extractants are used in wet copper smelting in the non-ferrous industry, and have good market growth prospects. On January 30, the company's 2nd Extraordinary General Meeting of Shareholders in '24 voted to pass a bill to acquire 61% of Fujian Zijin Mineral Processing Pharmaceutical Co., Ltd.'s shares and related transactions. In 2023, Zijin Pharmaceutical's copper extractant output is about 1924.36 tons, with a production capacity of 3,400 tons. In addition, the company also has 2,000 tons of beneficiation agents, 2,000 tons of phosphoric acid extractants, 1,000 tons of lead beneficiation capacity, and technical research and development capabilities for mineral processing additives. Global demand for copper extractants mainly comes from overseas regions such as Chile and the Democratic Republic of the Congo (DRC). The main competitors are BASF, Solvay, Kangpuchem, and Zijin Pharmaceuticals. Compared with overseas giants, domestic companies have an advantage in terms of service and product cost performance. As the company's copper extractant production capacity climbs, the scale advantage is reflected, and the market share and net interest rate are expected to gradually increase.
Risk warning: The marketing of new technology is unfavorable, accounts receivable balances are large, and customer concentration is high.