Key points of investment:
Maintain an “Overweight” rating. We maintain the company's projected net profit for 2024-2025 and add 1.32 billion yuan, 1.59 million yuan, and 198 million yuan, respectively, and corresponding EPS of 1.10, 1.33, and 1.65 yuan respectively.
The production capacity of the company's entire line of internal combustion engine catalysts has increased, while new energy storage and hydrogen energy businesses are progressing steadily, maintaining a target price of 44.35 yuan and maintaining an “increase” rating.
Increased sales of the entire line of internal combustion engine exhaust catalysts drove high revenue growth, and the performance was in line with expectations. In 2023, we achieved operating income of 1,544 billion yuan, an increase of 245% over the previous year; net profit attributable to mother was 42.23 million yuan, after deducting net profit of 10.35 million yuan from non-return to mother, which turned a loss into a profit. The main reasons for the increase in revenue are: ① the increase in demand for heavy gas commercial vehicles in China driving the company's supporting exhaust catalysts; ② batch supply for major passenger car customers; ③ full implementation of diesel non-road national 4 and light vehicle national 6 b emission regulations; ④ the steady progress of new industrial catalysts, energy storage and energy storage+ and hydrogen energy businesses.
Sales of heavy natural gas truck terminals increased year-on-year, and sales of the company's supporting exhaust catalyst products increased. In 2023, China sold 150,000 heavy natural gas trucks, an increase of 307% over the previous year. The company's natural gas heavy truck catalysts have been supplied in batches to leading downstream engine manufacturers FAW Jiefang, Sinotruk, and Yuchai. The high concentration of terminal natural gas heavy truck sales is high, and the high increase in natural gas heavy truck sales has led to an increase in the company's natural gas heavy truck catalyst sales.
The increase in the scale of production and sales had a scale effect. The overall gross margin increased year-on-year, and the cost ratio was well controlled. 1) The new catalyst intelligent manufacturing park was ready for use in November 2023, adding packaging capacity for the entire line of internal combustion engine exhaust catalysts and ancillary products. Due to the scale effect, the company's comprehensive gross margin increased by 6.33% to 11.91% year-on-year in 2023. 2) The sales expense ratio, management expense ratio, and R&D expense ratio were 2.99%, 2.63%, and 5.26%, respectively, with year-on-year decreases of 4.82%, 5.83%, and 14.52%, respectively.
Risk warning: risk of fluctuations in raw material prices, risk of fluctuations in energy prices.