Core views:

According to the company's performance report, in '23, the company achieved revenue of 794 million yuan, +32% year-on-year, net profit to mother of 158 million yuan, -5% year-on-year, and net profit of 149 million yuan after deducting net profit not attributable to mother, or -5% year-on-year. The performance was in line with expectations. In 2023, the company continued to increase investment in R&D, strengthen internal management, actively explore the market, promote the implementation of new production capacity, increase product supply capacity, increase production and sales volume over the same period last year, and steadily grow in various businesses.

Q4 There was a certain increase in profit margins. Among them, Q4 revenue was 206 million yuan, +4% year on year, net profit attributable to mother was 52 million yuan, -12% year on year, and net interest rate increased to 25% in a single quarter. Q4 Revenue was slightly lower month-on-month, mainly due to a decrease in overall tools, a decrease in the number of CNC blades but an increase in prices. Profit margins continued to rise in a single quarter, mainly due to an increase in overall gross margin and a decline in its share.

Increase research on materials that are difficult to process in aerospace and other fields. The domestic aerospace market is developing rapidly, and demand for cutting tools is also soaring. According to the company's 23 annual report, the company has continued to research and develop related tools in recent years, and has achieved certain results in the research and development of coated tools for heat-resistant alloy processing.

The overall amount of tungsten carbide is gradually being released. Overall tungsten carbide tools are widely used in the fields of 3C, molds, aerospace, automobiles, etc. According to the company's 23 annual report, the company has actively carried out relevant technical layout and has relatively mature development and manufacturing capabilities. In the future, the company will increase investment in this field and actively achieve technological breakthroughs.

Profit forecasting and investment advice. The company's net profit for 23-25 years is estimated to be 1.582.30/318 million yuan, respectively. Referring to comparable company valuations, we gave the company 25 times PE in 24 years, corresponding to a reasonable value of 92.84 yuan/share, maintaining a “buy” rating.

Risk warning. The risk of macroeconomic fluctuations; the risk of uncertainty in the external environment; the risk of industry and market competition, etc.