4Q23 results are in line with our expectations
The company announced 2023 results: revenue of 1.50 billion yuan, up 39% year on year; net profit to mother was 164 million yuan, up 35% year on year, at the center of the January performance forecast. Corresponds to 4Q23 operating income of 330 million yuan (YoY 23%) and net profit to mother of 0.27 million yuan (YoY -4%).
The 4Q23 net profit margin fluctuated. The 4Q23 gross profit margin was 25.2%, up 1.6 ppt year on year, mainly due to the increase in the share of high added value in petroleum refining and coal chemicals. However, due to the impact of credit impairment losses, income tax, etc. in the fourth quarter, the net profit margin for 4Q23 decreased 2.3/3.2ppt to 8.3% year-on-year.
Traditional energy orders were strong in 2023. 1) In terms of business, the revenue of petroleum refining equipment/oil and gas equipment/natural gas chemical equipment/coal chemical equipment increased 168%/62%/46%/31% year-on-year in 2023, and gross margin was +5.6/+7.1/-2.1/+7.0ppt. The share of Kexin Mechatronics's revenue from traditional energy sources increased sharply to 72% in 2023, an increase of 16.7pct compared to 2022. 2) New energy equipment was affected by the cyclical weakening of photovoltaic equipment. In 2023, revenue fell 13%, and gross margin fell 2ppt. 3) Taken together, the company's overall gross profit margin in 2023 was 23.4% (a slight decrease of 0.65ppt from the previous year), and the net profit margin was 10.9%.
The export business grew steadily, benefiting from the internationalization of natural gas chemicals. In 2023, the company went global through an engineering company, with annual revenue of 39.69 million yuan (YoY 17.8%), and became the core supplier of the four major gas chemical urea plants in the African and Middle East markets. Overseas gross profit margin was 34.3% in 2023, higher than domestic 8.3ppt.
Development trends
Refinancing has entered a period of releasing production capacity. Pressure vessels are a capital-intensive industry and are constrained by large-scale manufacturing capacity. The company completed a fixed issuance of 581 million yuan in 2023Q1. Based on the equipment production capacity of 21,800 tons/year at the end of 2022, the design capacity was increased by 8,400 tons/year (about 40% increase flexibility, and the construction cycle is 1.5 years). According to company exchanges, trial production of 2024Q1 high-end process equipment has begun, and the digital upgrade and purification transformation project has been postponed until December 2025.
Profit forecasting and valuation
Considering the impact of the transformation of construction projects under construction in the next two years, we lowered 2024/2025 net profit of -7.5%/-13.8% to 1.9/240 million yuan, the current price corresponding to 2024/2025 PE was 16/13 times, the target price was reduced 10.3% to 12.9 yuan, corresponding increase space 19.0%, maintaining the “outperforming industry rating”, and the target price corresponding to 2024/2025 PE was 17/13 times.
risks
The risk of intense market competition and the risk of fluctuations in profitability in a single quarter.