The company's annual performance was in line with expectations, with 23Q4 revenue and profit growing rapidly. 1) Revenue in '23 was 13.309 billion yuan, up 3.95% year on year; net profit to mother was 1,216 billion yuan, up 0.48% year on year; gross profit margin was 22.91%, down 2.58 pct year on year, net profit margin was 9.58%, down 0.45 pct year on year. The decline in profitability was mainly affected by the decline in gross margin of the gas business due to falling rare gas prices. 2) 23Q4 achieved revenue of 3.529 billion yuan, a year-on-year increase of 16.19%, and net profit of 365 million yuan, turning a loss into profit over the same period of the previous year; gross profit margin was 19.16%, up 5.47pct year on year, a net profit margin of 10.68%, and -1.47% for the same period in '22.
Revenue from the gas business increased steadily, and gross margin declined due to multiple factors. In 2023, the company's gas business achieved revenue of 8.194 billion yuan, an increase of 2.33% over the previous year. Due to factors such as a sharp drop in rare gas prices and a slump in the liquid market, the gross margin of the gas business fell 6.54 pct year on year to 18.75%. However, the company continues to expand the basic market of the gas business, diversifying the gas product categories, and the overall competitive advantage of the gas business is obvious. A number of new gas investment projects were signed throughout the year, including Shandong Hangzhou Oxygen, Henan Jinkai, and Shanxi Tianze, with an oxygen production capacity of 450,000 Nm? /h, the cumulative amount of oxygen produced by gas investment is 3.2 million Nm? /h; The company's gas retail market has sold 2.4 million tons of liquid and 430,000 bottles of bottled gas throughout the year, and has invested in 34 unattended on-site gas production projects; the company continues to enrich the range of specialty gas products, becoming the first domestic enterprise to also independently develop liquid helium tanks and achieve mass production, directly imported helium sources, and has the ability to guarantee the supply of electronic-grade helium gas.
The revenue from the equipment manufacturing business is impressive, and we are actively expanding overseas markets. In 2023, the company's equipment sales business achieved revenue of 4.723 billion yuan, up 5.96% year on year; gross margin was 29.90%, up 3.81 pct year on year.
Despite the complicated macroeconomic situation, the company's equipment sales revenue is still impressive. In 2023, the company signed new equipment contracts reached 6.470 billion yuan, of which the annual foreign trade contract amount reached 908 million yuan, accounting for 14.03%, and the share of overseas sales of cryogenic petrochemical equipment increased to 53%.
Focus on R&D innovation and continuously enhance core competitiveness. In 2023, the company spent 453 million yuan on R&D, and the R&D results were remarkable. The company has developed the longest cross-section heat exchanger in China, and has already been commissioned and operated; realized stage 1 and 2 automatic brazing of vacuum brazing furnaces; and developed a novel energy-saving air separation process and equipment combined with energy storage technology. Faced with the continuous influx of new entrants to the gas industry, and competitors continue to expand and strengthen the fierce market competition situation through mergers, acquisitions, listing, etc., the company's continued investment in R&D is expected to enhance the company's development resilience.
Profit forecasting, valuation and ratings. The company's performance is growing steadily, but the decline in rare gas prices has had a certain impact on the company's short-term profitability. We adjusted the company's net profit to 2024/2025 to be 141/1.79 billion yuan, an adjustment margin of -21.7%/-10.2%, and an additional 2026 net profit forecast of 2.06 billion yuan, corresponding to the 24-26 EPS of 1.43/1.82/2.10 yuan, respectively. The company's gas business category continues to expand, equipment orders are full, and the “buy” rating is maintained.
Risk warning. Economic sentiment continues to decline, gas prices have dropped sharply, and progress in the specialty gas business has stalled