Revenue and profit grew steadily. Focusing on reporting quality and high dividend investment value, the company released 23 annual reports, achieving operating income of 2,657 million yuan, +1.82% year on year; realized net profit of 282 million yuan, +3.07% year over year, after deducting non-net profit of 273 million yuan, +4.71% year on year, of which Q4 achieved revenue of 665 million yuan in a single quarter, -2.4% year over year, achieving net profit to mother of 84 million yuan, +6.8% year over year. Benefiting from the recovery in the chemical industry, the company's performance has shown a gradual improvement trend since the second half of '23. Previously, the company signed a 1,307 billion yuan chemical engineering order for Huajin North China, and gradually contributed impressive results from 24-25. Furthermore, the Luyou and Lu Refining project is progressing at an accelerated pace, and we expect that the future may bring new growth points to the company's performance. The company's total cash dividend in '23 was 190 million yuan, accounting for 69% of net profit attributable to mother. The dividend ratio corresponding to the closing price on March 22 was 5.39%. By the end of '23, the company's cash on book (monetary capital+transactional financial assets+debt investment) totaled 1.703 billion yuan, accounting for 47% of the total market value. At the same time, there were no short-term or long-term loans. The balance ratio was only 17.84%, and the financial statements were healthy. It is recommended to focus on medium- to long-term investment value.
The engineering design business is growing steadily, and the expansion of the new materials business continues to advance by business segment: 1) Engineering sector: The company's general engineering contracting/engineering design achieved revenue of 47/120 million yuan respectively in '23, -16.3%/+25.6% year-on-year, with gross margins of 28.0%/49.6%, respectively, and +6.5/+0.7pct year-on-year, respectively. 2) Chemicals and catalysts: The alkydates/residual liquid processing/catalyst business achieved revenue of 13.8/4.4/230 million yuan, +3.5%/+11.85%/+12.9% year-on-year respectively. The gross margin was 14.1%/24.7%/26.3%, +0.7/+0.5/-3.2pct, respectively. 3) New materials: In '23, the company invested in the establishment of two new subsidiaries, “3D New Energy” and “3D Longbang”, as R&D and management platforms for new materials such as cellulose acetate butyrate, derivatives, and octanoic acid. Cellulose acetate butyrate achieved initial sales revenue of 1.96 million yuan in '23, and there is still plenty of room for improvement in subsequent profitability and revenue growth.
Profitability has increased slightly, and there is still room for improvement in cost rates
The company's comprehensive gross margin in '23 was 21.2%, +1.67pct year on year, and the cost ratio for the period was 8.87%, +0.89pct year on year. Among them, sales/management/ R&D/ finance expenses were 0.85%/4.06%/4.30%/-0.34%, respectively, and +0.2/+0.39/+0.14pct year over year, respectively. Investments in employee remuneration and labor costs increased, and expenses were not effectively spread due to a slowdown in revenue growth. The company's asset and credit impairment losses totaled RMB 0.1 billion in '23, and the net interest rate was +0.2pct to 10.9% year-on-year under the combined impact. The net CFO of the company in '23 was 506 million yuan, with a year-on-year decrease of inflows of 0.05 billion yuan, a revenue ratio of -2.74 pcts to 105.52% year over year, and a payout ratio of -0.43 pct to 92.65% year on year.
Focus on medium- to long-term investment value and maintain a “buy” rating
Currently, the company's PE (TTM) is 12.8 times. The PE fraction since 2010 is 13.8%, and the valuation is relatively low in history. We maintained our 24-25 net profit forecast of 3.2 billion yuan to mother, and added a net profit forecast of 420 million yuan to the mother for 26, maintaining a “buy” rating.
Risk warning: The settlement of engineering orders fell short of expectations; the cash dividend ratio fell short of expectations; the decline in the chemical industry exceeded expectations.