Incident: The company released its 2023 annual report, achieving full year revenue of 10.973 billion yuan, YOY -7.64%; net profit attributable to mother of 509 million yuan (minus 347 million yuan), YOY -36.74% (minus 46.92%). The 2023 profit distribution plan is a cash dividend of 2 yuan (tax included) for every 10 shares.
The impairment of goodwill affected performance, and cash flow increased dramatically.
During the reporting period, the company's gross profit margin and net interest rate were 23.68%, 4.61%, YoY+0.28pct, and -2.20pct; the cost ratio for the period was 14.74%, YoY+1.12pct; ROE (weighted) 6.74%, year-on-year - 4.44pct; during the reporting period, the company's gross margin increased steadily, but asset impairment dragged down the company's overall profitability. The company calculated a total of 418 million yuan in depreciation of various assets, of which 361 million yuan was the main reason for the sharp decline in the company's net profit. During the reporting period, the company's debt ratio was 68.58%, YOY-2.74pct, and the interest-bearing debt ratio was 19.77%, which was at a low level. During the reporting period, the company's current net revenue was 1.706 billion yuan, YOY +104.44%, and the net present ratio reached 154.97%, which reflected the good quality of profits.
Environmental protection: Overall performance is steady, and new contracts in the power industry have increased dramatically.
The company is the world's largest R&D manufacturer of atmospheric environmental protection equipment. The R&D, manufacturing and engineering performance of equipment such as dust removal, desulfurization and denitrification, electronic control, and environmental transportation is in a leading position in the industry. The overall technology has reached the international advanced level, the layout technology is internationally leading, and the engineering performance is spread across more than 50 countries and regions around the world. During the reporting period, the company's environmental protection equipment manufacturing revenue was 9.829 billion yuan, YOY -8.48%, gross profit margin 23.39%, and performance and profitability remained relatively stable. Benefiting from the “Xiaoyangchun” policy of the coal and power industry and the boost in demand for transformation and upgrading, the power industry saw a significant year-on-year increase of 18.510 billion yuan in environmental protection project contracts; during the reporting period, the company added 10.287 billion yuan in environmental protection engineering contracts, an increase of 5.11% over the previous year, of which the power industry accounted for 58.11% and the non-electricity industry accounted for 41.89%.
New energy: green electricity and energy storage have entered the performance release period.
2023 was the beginning of the company's “environmental+new energy” development strategy. It had a good start. During the reporting period, it achieved revenue of 36.64 million yuan, gross profit margin of 46.62%, and strong profitability. In terms of energy storage, the first phase of the Longjing Honeycomb energy storage PACK project with an annual output of 2 GWh has been completed and put into operation, and the Shanghang 5GW energy storage battery project was also put into operation at the beginning of this year. Relying on the Zijin Mine's clean energy business, construction of the nearly 1 GW scenic green power project is progressing smoothly. We determine that with the commissioning of energy storage and green power projects, the company's new energy business will usher in a period of explosion in 2024. At the same time, the company is also actively deploying emerging fields such as carbon capture, green power hydrogen production equipment, and lithium extraction adsorbents. The company will rely on the “double carbon” strategy of the controlling shareholder Zijin Mining, and have significant industrial chain business synergy advantages to create a second growth curve for new energy.
Valuation analysis and rating instructions:
The company's net profit for 2024-2026 is estimated to be 1,143 billion yuan, 1,349 billion yuan, and 1,620 billion yuan respectively. The corresponding PE is 11.62 times, 9.85 times, and 8.20 times, respectively, maintaining the “recommended” rating.
Risk warning:
Risk of environmental business orders falling short of expectations; risk of new orders falling short of expectations; risk of new energy development falling short of expectations.