Net profit to mother in '23 was +22.0%/+44.9% YoY. Maintaining the publication of the “Purchase” company's annual report for '23: Achieving revenue/net profit of 96.1/960 million yuan in '23, +22.0%/+44.9% YoY, net profit to mother was in line with our expectations ($960 million). The company also announced restricted stock and equity incentive plans, which are expected to give full play to employees' enthusiasm. We believe that the company will continue to diversify and expand overseas markets, and the scale is expected to continue to grow. The company's net profit to mother is estimated to be 10.8/12.2/1.4 billion yuan in 24-26. Comparable companies Bloomberg and Wind have a consistent average expectation of 14.1xPE in 24. Considering that the short-term liquidity of the company was greatly affected after being transferred out of Hong Kong Stock Connect, the company was given 8xPE for 24 years, with a target price of HK$2.96 to maintain a “buy.”
The scale of equipment operation and utilization rate increased steadily. Overall gross margin declined slightly in 23 years. Revenue from the company's operating leasing services/engineering technology services/platforms and other services was 51.4/29.6/1.51 billion yuan, respectively, -1.0%/+38.8%/+173.4%; gross margin was 44.6%/29.2%/40.2%, compared to -0.1/-0.8/+8.7pct. The overall gross margin declined slightly by 0.7 pct to 39.1%. Among them, the sharp increase in platform and other service revenue was mainly managed by the company The scale of aerial work platforms operated by the model increased by 167.9% year-on-year to 57,000 units. By the end of 23, the management scale of the company's aerial work platform/new support system/new mold frame system reached 178,000 units/1,555,000 tons/721,000 tons, +35.3%/+15.7%, utilization rate 80.0%/70.1%/73.2%, compared to +2.7/+2.2/+1.5pct. Overall, the company's equipment operation and management scale and utilization rate have steadily increased.
The average financing interest rate and financial expense ratio declined markedly. The net operating cash flow rate was +40% year-on-year, and the company's sales/management/ finance expense ratio in 23 was 5.4%/11.2%/8.7%, respectively, +1.1/+0.2/-3.0pct. Among them, the significant decline in financial expense ratio was mainly due to the company's continuous optimization of financing channels and financing structures, and the 23-year average financing interest rate fell 0.3 pct to 4.2% year on year. The company's net operating cash flow in '23 was 3.95 billion yuan, +40% year-on-year, mainly due to the company's vigorous expansion of equipment management business with low capital consumption. At the same time, the company announced changes in accounting policies for some assets starting in '24, changing the expected service life of hot-dip galvanizing process scaffolding in the new mold frame system from 10 to 20 years, and changing the estimated net residual value ratio from 10% to 30%, which is expected to reduce the company's depreciation costs.
Restricted stocks and equity incentive plans were announced. Overseas and diversified development is steadily advancing, and the company announced on March 12 that it will adopt a restricted share award scheme and recommend the adoption of a share option plan. It intends to grant restricted shares and stock options not exceeding 3.5%/1.5% of the company's total issued shares to the company's core personnel. We believe that the launch of this plan will fully motivate employees and attract and retain excellent talent. By the end of '23, the number of domestic core business locations had reached 490, and the number of overseas outlets had reached 4. Overseas business is expected to become an important growth point for the company. At the same time, the company began the introduction and marketing of various categories such as telescopic forklifts and car cranes in '23, and actively explored various scenarios such as housing infrastructure renovation and urban building operation and maintenance, and further promoted diversified development.
Risk warning: Demand growth has slowed, asset management efficiency has fallen short of expectations, and profitability has declined.