Incident: The company announced its 2023 results. In 2023, the company achieved operating income of 21.17 billion yuan, an increase of 17.26% year on year; realized net profit of 314 million yuan, up 16.44% year on year; net profit after deducting non-return to mother was 280 million yuan, up 17.08% year on year; and basic earnings per share were 0.62 yuan. Q4 achieved revenue of 590 million yuan, up 8.24% year on year, and net profit to mother of 94 million yuan, up 3.03% year on year.
By business, environmental test equipment/environmental test service/integrated circuit achieved revenue of 753/10.03/257 million yuan, up 23%/19.45%/2.34% year on year. The company's comprehensive gross margin was 45.6%, -1.06 pct year on year, and gross margin of the three businesses was 32.8%/58.8%/43.3%, respectively, -1.01%/+1.85%/-13.8% year over year. In terms of cost ratio, the company's annual expense ratio was 26.37%, down 1.89pct year on year. Among them, sales/management/finance/R&D expenses were 6.4%/10.94%/1.16%/7.87%, respectively, and +0.05/-1.65/ -0.71/+0.42pct year on year.
The laboratory network continues to expand, and the fund-raising project is about to increase vertical and horizontal expansion. According to the laboratory, Suzhou Guangbo/Shanghai Yite/Beijing Chuangbo/Chengdu Guangbo/Xi'an Guangbo respectively achieved revenue of 3.6/2.8/1.5/1.2/100 million, +17.4%/-6.2%/10.6%/21%/19%, net profit 0.93/0.44/0.38/0.28/0.28 billion, +13%/-20.9%/76%/-30%/17.2%. The decline in Yite's net profit is mainly due to the expansion of production capacity and talent reserves, and operating costs have increased. Overall, the company continues to expand its service network and strengthen test capacity building: on the domestic side: it has successively established special laboratories in Guizhou and Mianyang to refine the service network and enhance scale effects. In October 2023, new energy laboratories will be launched separately in Shenyang and Chongqing, which will have testing capabilities and vehicle environmental test warehouses covering mandatory core projects such as performance, longevity, environmental adaptability, and operating conditions of new energy vehicles; overseas business growth can be expected. The new energy vehicle product testing center expansion project and the fifth-generation mobile communication performance testing technology service platform project are expected to be officially put into operation in the second half of 2024, helping the company focus on emerging businesses.
Emerging industries are poised to release additional testing volumes. Looking at the distribution industry, the revenue growth rates of research and testing institutions/automobile and rail transport/aerospace/electronic and electrical industry were 24%, 36%, 12%, and 15%, respectively, in 2023, which is an important driving force for business growth. The company continues to increase testing capacity for environmental and reliability, integrated circuit verification and analysis, electromagnetic compatibility, etc., and accelerate the expansion of application fields such as new energy, energy storage, aerospace, communications, and medical devices. On March 27, 2024, the Ministry of Industry and Information Technology and other departments issued the “Implementation Plan for Innovative Application of General Aviation Equipment (2024-2030)”. The “Implementation Plan” mentioned several aspects of airworthiness forensics and third-party testing: (1) Promoting airworthiness certification for a number of new types of consumer general aviation equipment. Encourage flying vehicle technology research and development, product verification and commercial application scenario exploration; (2) Accelerate the co-construction and sharing of test and verification resources, encourage the establishment of general aviation airworthiness technology services and compliance verification, and third-party drone testing and testing capabilities, and support the construction of bases for flight testing and application testing. As development support in the field of general aviation continues to increase, new product launches and technological innovation are expected to fully release testing needs.
Investment advice and valuation: Based on the company's 2023 performance, we adjusted our previous profit forecast and added the 2026 forecast. We expect the company to achieve sales revenue of 26.55/31.95/38.17 billion yuan in 2024-2026, up 25.4%, 20.3%, and 19.5% year-on-year increase, and realized net profit to mother of 4.01/5.25/ 611 million yuan, up 27.5%, 31.1%, 16.3% year-on-year, and corresponding PE is 18X, 14X, 12X, 12X, respectively. Maintain a “buy” investment rating.
Risk warning: the risk of macroeconomic fluctuations, the risk of rising raw material costs, the risk of increased competition in the industry, the risk of new construction projects falling short of expectations.