Description of the event
The company released its 23rd annual report, with revenue of 13.309 billion yuan, +3.95% year on year; net profit to mother of 1,216 billion yuan, +0.48% year on year; net profit after deducting non-return to mother of 1,124 million yuan, -0.17% year on year.
Looking at a single quarter, 23Q4 achieved revenue of 3,529 billion yuan, +16.19% year over year; net profit to mother of 365 million yuan, +758.28% year over year; net profit after deducting non-return to mother of 319 million yuan, +464.40% year over year.
Incident comments
The gross margin of the equipment business has improved markedly, and we are waiting for the gas business boom to recover. The equipment sales business revenue was 4.723 billion yuan, up 5.96% year on year, and gross margin was 29.90%, up 3.81 pct year on year. Benefiting from factors such as falling raw material prices, the company's gross margin of air separation equipment business reached 31.5%, up 4.77pct year on year; gas business revenue was 8.194 billion yuan, up 2.33% year on year, gross profit margin 18.75%, down 6.54 pct year on year, mainly affected by factors such as the sharp drop in rare gas prices and the slump in the liquid market. Looking at the recent gas market, the climate is improving, and industrial gas prices have mostly risen. According to Zhuochuang information, the average price of liquid oxygen in March was 414.63 yuan/ton, up 20.69% from the previous month, and down 16.87% from the previous year.
The average monthly price of liquid nitrogen products reached 454 yuan/ton, up 50.18 yuan/ton from month to month, and down 57.92 yuan/ton year on year. The average monthly price of liquid argon was 1139.77 yuan/ton, up 5.77% month-on-month and 8.81% year-on-year. Furthermore, market prices for xenon and neon gas both rose slightly month-on-month in March. It is expected that as economic expectations improve, downstream related industries will gradually recover, which may drive demand in the gas market.
Gas investment business and equipment order structure optimization, gradually moving towards internationalization. 1) In terms of gas projects, the company signed several new gas investment projects throughout the year, such as Shandong Hangxi, Henan Jinkai, and Tianze, Shanxi. The oxygen production capacity (nitrogen containing project) was 450,000 Nm3/h, an increase of 15.4% over the previous year. Furthermore, the company has signed a new Indonesian gas project, and the gas industry is becoming international. Sufficient gas projects in progress are expected to provide a definite increase in the company's performance over the next few years. 2) In terms of equipment business, the company signed new equipment sales contracts of 6.470 billion yuan throughout the year, of which the foreign trade contract amount reached 908 million yuan, which increased to 14.03%, and the share of overseas sales contracts for cryogenic petrochemical equipment increased to 53%. The company's equipment and gas investment business both went overseas in '23, which is expected to continue to drive the company's revenue growth and increase the company's profitability.
Accelerate the expansion of gas retail sales, and the strategic layout of the specialty gas sector continues to advance. 1) In '23, the company adjusted its gas retail center structure to drive continued growth in sales volume in the gas retail business. It sold 2.4 million tons of liquid and 430,000 bottles of bottled gas throughout the year. Based on traditional industries such as steel, we actively develop medical gases, food gases, high-purity gases, etc., and continue to expand the field of gas applications.
Vigorously expand the unattended on-site gas production business, and signed 12 new projects in '23. 2) The company is speeding up the integration of the Mergers and Acquisitions of SEAT Electronics and Wanda Gas, and the categories of specialty gas products are gradually being enriched. At the same time, it has made a major breakthrough in helium supply, becoming the first domestic enterprise to independently develop and mass-produce liquid helium tanks, directly import helium sources, and have the ability to guarantee the supply of electronic-grade helium. It has formed an autonomous, controllable, and stable helium supply chain, with a remarkable competitive advantage.
Maintain a “buy” rating. As a domestic industrial gas leader, the company's equipment and gas investment business are both overseas. New business segments continue to advance, and it is expected to gradually become a global industrial gas giant. The company is expected to achieve net profit of 1.44 billion yuan and 18.01 billion yuan in 2024-2025, corresponding to PE 20 or 16 times.
Risk warning
1. The risk of increased competition in the industry;
2. The risk of poor gas price performance.