The company released the 2023 performance report, and the performance grew steadily

On February 29, the company released the 2023 annual performance report. In 2023, the company expects to achieve total revenue of 5.748 billion yuan, an increase of 7.63% year on year; achieve net profit of 709 million yuan, an increase of 15.40% year on year; achieve net profit without deduction of 666 million yuan, an increase of 18.31% year on year. The company's overall gross profit level has increased, and its performance has been growing steadily. The main reason is that (1) NEV products benefit from development opportunities in the new energy industry and are growing rapidly; (2) at the same time, the company continues to increase investment in R&D, continuously improve the level of automation, and increase profit margins.

“New Materials+New Energy” has developed in depth. The diversified product matrix Wall's nuclear products include more than 2,500 products such as heat-shrinkable tubes, heat-shrinkable busbars, heat-shrinkable cable accessories, cable branch boxes, etc., which are widely used in electronics, electricity, metallurgy, petrochemicals, automobiles, high-speed rail, coal mines and aerospace. The products are exported to many countries and regions such as Europe, America, Southeast Asia, etc., and their stable quality and reliable performance have formed the “Wall Nuclear Materials” brand effect.

Increase investment in R&D and enter the field of high-end products. In terms of wire products, the company successfully developed 400G high-speed communication lines and achieved stable mass production. The finished product has a small wire diameter and is soft, and has now been used in many high-speed communication projects; it has successfully developed PCIe 5.0 high-speed switch cables, which can be used as high-speed high-end in-flight cables. In terms of power products, the 330kV and 500kV ultra-high voltage cable accessories independently designed and developed by the company passed pre-certification tests at the power industry electrical equipment quality inspection and testing center, marking that the company has become one of the domestic manufacturers that can produce ultra-high voltage cable accessories, and the company will actively increase its market development efforts for related products.

In terms of electronic products, the company has made a breakthrough in the research and development of electronic products, entering the high-end industry, and aviation materials completed the development of two COMAC CELB series lashing label products.

Technological development catalyzes industrial upgrading, boosting demand for high-performance nuclear radiation materials. Driven by emerging industries such as 5G commercial use, the Internet of Things, cloud computing, and artificial intelligence, global data center construction, industrial robots, and new energy vehicles have developed rapidly.

On February 8, 2023, the Ministry and Commission issued the “Notice on Organizing and Launching Pilot Work in a Pilot Zone for Fully Electrified Vehicles in the Public Sector”. It is expected that the ratio of new standard vehicle piles will be added from 2023 to 2025. To achieve this goal, about 1 million additional public charging piles will be added to the market size of nearly 50 billion yuan.

Profit forecasting

The company is expected to achieve operating income of 57.48/6.7.44/8.041 billion yuan in 2023/2024/2025, up 7.62%/17.33%/19.23% year-on-year respectively; net profit to mother is 7.10/8.43/1,038 billion yuan, respectively, up 15.62%/18.67%/23.14% year-on-year, and corresponding EPS is 0.56/0.67/0.82 yuan, respectively.

Based on the closing price of 7.05 yuan on March 6, 2024, the corresponding PE corresponding to 2023-2025E was 12.50/10.53/8.55 times, respectively. First coverage, giving a “buy” rating.

Risk warning:

Macroeconomics falls short of expectations, risk of raw material price fluctuations, project construction falls short of expectations, etc.