2023 results were slightly better than our expectations
The company announced its 2023 results: revenue of 1.97 billion yuan, up 9.54% year on year; net profit to mother of 239 million yuan, up 23.11% year on year; net profit after deducted from mother was 211 million yuan, up 9.34% year on year. The performance was slightly better than our expectations, mainly revenue growth was better than our expectations.
Revenue from the main business grew steadily; profitability improved slightly. The company's revenue in 2023 increased 9.5% year on year, of which general aviation transportation revenue increased 12.4% year on year. In 2023, the total amount of contracts executed by the company and CNOOC, a major customer, was 1.41 billion yuan, an increase of 9% over the previous year. In addition to the offshore petroleum business, the company continued to actively expand emergency rescue, navigation maintenance and land navigation services to promote the formation of a new general aviation business model. On the cost side, the company's operating costs rose 8.3% in 2023, slightly lower than the revenue growth rate. The gross margin improved 0.9 percentage points to 21% year on year; the net profit margin improved 1.3 percentage points year on year to 12.1% year on year.
Development trends
According to the annual report business plan, the company aims to achieve revenue of 2 billion yuan by 2024; the “low altitude economy” may be ready to go. We believe that demand for offshore oil in the company's main downstream markets will be stable in 2024. According to the CICC Group's estimates, the 1H24 Brent oil price center may be at 85 US dollars/barrel, which is a slight increase over the previous year. In terms of new business formats, the 2023 Central Economic Work Conference emphasized the need to build a number of strategic emerging industries such as the “low altitude economy”. The “low altitude economy” was also mentioned for the first time in the 2024 government work report. As relevant policies continue to be implemented in various regions, we believe that the low altitude economy market is ready to develop, and it is recommended to continue to pay attention to the implementation of subsequent application scenarios, including new business trends such as drone logistics and air tourism.
Profit forecasting and valuation
We raised the company's 2024 revenue forecast by 7% to RMB 2,194 million and our net profit forecast by 6% to RMB 282 million, mainly raising the business volume growth assumption; introducing a profit forecast of 322 million yuan for 2025.
The company's current stock price corresponds to 36.8 times the 2024 price-earnings ratio and 32.3 times the 2025 price-earnings ratio.
Maintaining a neutral rating, considering the market's rising investment sentiment towards the “low altitude economy,” we raised our target price by 39% to 11.0 yuan, which corresponds to 30 times the price-earnings ratio of 2024. There is room for an 18% decline compared to the current stock price.
risks
Downside risks: Downstream customer demand falls short of expectations; low-altitude economy commercialization process falls short of expectations; costs and expenses exceed expectations.
Upside risk: Low-altitude economic development is faster than expected; cost control is better than expected.