Incident: The company released its 2023 annual report on March 27, 2024. In 2023, it achieved revenue of 2,541 million yuan, +18.05% year over year, net profit to mother 305 million yuan, +112.00% year over year; net profit after deducting non-return to mother was 274 million yuan, +143.65% year over year. By business, the integrated civilian explosion business achieved revenue of 1,745 billion yuan, excluding factors influencing the scope of the consolidated report, +19.71%; the military new materials business achieved revenue of 173 million yuan, -3.99%; the rail automation and information technology business achieved revenue of 243 million yuan, -7.30% year over year; and other businesses achieved revenue of 380 million yuan, +50.56% year over year.

The “one, two wings” development pattern supports technological innovation advantages, and the profit situation is progressing steadily. In 2023, the company's gross profit margin was 35.88%, +0.50pct year on year; net profit margin was 13.84%, +5.48pct year on year. The integrated civilian explosion industry has extended the chain, the development of the new military materials industry has accelerated, and the rail transit automation and information technology industry has achieved great results. In terms of period expenses, R&D expenses were 138 million yuan, +18.29% over the same period. In 2023, the company was selected as the “Double Hundred Enterprises” list of the State Assets Administration Commission and the individual champion enterprise in the Jiangxi manufacturing industry. The wholly-owned subsidiary was also selected as a “specialized little giant” enterprise in Jiangxi Province, and its ability to innovate was widely recognized.

“Centralized Preparation+Remote Delivery” is beginning to take shape, and market coverage may increase further. During the reporting period, the company's fixed assets were 966 million yuan, +6.15% compared to the beginning of the period. The wholly-owned subsidiary completed the acquisition of dangerous goods transportation qualifications, further enhancing its ability to develop external blasting services; the contract debt was 38 million yuan, +121.83% compared to the beginning of the period, which may indicate that the company is actively expanding and strengthening the civilian explosion business.

The company's new military materials sector may have a lot of room for growth in the future. As a researcher and manufacturer in the field of novel tungsten alloy materials, the subsidiary Aoke New Materials has successfully developed a variety of novel tungsten-based damage materials. The subsidiary Tuohong New Materials increased its market share in the tantalum-niobium segment by at least 5% in 2023, and the country's strategic reserves increased, which directly led to a surge in demand for tantalum-niobium products in the field of military electronic components and high-temperature hard alloys.

Investment advice: The company's net profit for 24/25/26 is estimated to be 475/5.37/804 million yuan YoY +56.0%/+13.1%/+49.7%. Maintain an “Overweight” rating.

Risk warning: Product batch production falls short of expectations; military orders fall short of expectations; competition in the civilian explosion industry intensifies.