Matters:
In 2023, the company achieved operating income of 1,510 billion yuan, an increase of 0.37%; net profit attributable to shareholders of listed companies was 203 million yuan, a year-on-year decrease of 28.51%; it plans to distribute a cash dividend of 3.00 yuan (tax included) for every 10 shares to all shareholders.
Commentary:
Revenue increased slightly, and gross margin dragged down performance. In 2023, the company achieved operating income of 1,510 billion yuan, +0.37% year-on-year; net profit to mother was 203 million yuan, -28.51% year-on-year. By sector, environmental monitoring systems and industrial process analysis systems achieved revenue of 1,2008/244 million yuan respectively, or -5.53%/+42.16% year over year.
The company's performance was slightly lower than the original forecast. We believe the reasons are as follows: 1) The downward pressure on the macroeconomy is strong, demand in the domestic environmental monitoring market is weak and competition intensified. Although the company's revenue increased year on year, gross margin fell to 41.41% from 46.45% last year; 2) Due to the marked increase in travel frequency after the pandemic, the company's sales expenses increased 15% year on year, accounting for 13.01% of revenue from 11.37% last year.
Payouts improved significantly, and Q4 performance exceeded expectations. During the reporting period, the net cash flow from the company's operating activities was 318 million yuan, a significant increase of 54.96% over the previous year, mainly due to increased customer repayments. Against the backdrop of high economic pressure from downstream customers, the company's operating cash flow can still be improved, demonstrating the company's effectiveness in recovering funds. The corresponding company's 23Q4 only accrued credit impairment losses of 15.19 million yuan, a significant decrease from 40.46 million yuan in the same period last year. The net profit attributable to the company's single Q4 increased 50% over the same period last year, and the absolute value increased by 27.7 million yuan.
The high dividend policy will not change. The company's total cash dividend in 2023 was about 188 million yuan, and the dividend payment rate was as high as 92.49%, corresponding to the current price (2024.3.28 closing price) dividend rate of 4.3%. Over the past three years, the company has consistently implemented a high dividend policy based on the principle of rewarding shareholders. The dividend rates for 2021-2023 were 127.14%/86.62%/92.49%, respectively.
Carbon monitoring/industrial process analysis products are being promoted smoothly. The company's marine carbon emission measurement and monitoring system became the first high-precision carbon emission measurement system in China based on direct measurement and reliable data authentication technology; for the first time, industrial process analysis products were selected as qualified suppliers for leading companies in the domestic semiconductor industry, and in the future, they will join forces with the Orthodyne brand to expand the semiconductor electronic gas analysis market. Localized key instruments in this field are becoming more mature, and some new products have been tested and sold, which can further enhance the profitability of the industrial process analysis business in the future.
Investment advice: Maintain a “strong” rating, with a target price of 9 yuan in 2024. We lowered the company's profit forecast for 2024-2025 and added the 2026 forecast: the company's net profit from 2024 to 2026 is expected to be RMB 231 million, RMB 277 million (previous values were RMB 340 and RMB 423 million), and 297 million yuan, respectively, corresponding to 19 times, 16 times, and 15 times PE, respectively. We selected Cedrone's main competitors in the field of environmental monitoring instruments, Juguang Technology, and Lihe Technology as comparable companies, and referred to the company's historical PEBAND, and gave the company a target of 25 times PE in 2024, corresponding to the target price of 9 yuan.
Risk warning: Relevant policies fell short of expectations, domestic technology industrialization of overseas subsidiaries failed, market competition was intense, and G-end business declined.