Incident: China Satellite Communications released its 2023 annual report. In 2023, it achieved operating income of 2,616 billion yuan, YoY -4.30%; realized net profit to mother of 349 million yuan, YoY -62.21%; gross profit margin 35.71%, a year-on-year decrease of 0.76pct. Looking at a single quarter, 2023Q4 achieved revenue of 754 million yuan, YoY -7.50%, net profit to mother of -57 million yuan, and YoY -114.45%. The company experienced losses in the fourth quarter of 2023, putting pressure on full-year results.
Comment: Performance was pressured by the calculation of impairment and the cessation of tax benefits. The company's revenue declined slightly in 2023, mainly due to a decrease in other domestic business and a decrease in overseas business revenue. The main reason for the sharp decline on the profit side was that the company calculated impairment losses on Zhongxing 6C satellite assets in the current period, and the impact of confirmed satellite insurance claims and preferential tax policies in the same period last year. In 2023, the company achieved non-operating revenue of 30 million yuan, YoY -79.13%, mainly due to receiving claims from China Star 6A satellite insurance in the previous period.
On the cost side, in 2023, the company generated sales expenses of 54 million yuan, YoY -6.54%; management expenses of 194 million yuan, YoY +0.55%; R&D expenses of 69 million yuan, YoY +0.53%.
The launch of Zhongxing 26 and Zhongxing 6E built China's first complete high-orbit satellite internet, and market expansion continues to advance. The company has complete communication and broadcasting satellite resources, frequency orbital resources and ground station network resources. It is a basic telecommunications operator with autonomous and controllable communication and broadcasting satellite resources in China. The “Haixingtong” global network service covers more than 95% of the world's maritime routes, and Ka high-throughput satellites cover all of China and surrounding regions. During the reporting period, the company successfully launched the Zhongxing 26 and Zhongxing 6E satellites and completed the construction of the Five Star Five Arrows. The China Star 26 satellite is the first domestic high-throughput satellite with a capacity of over 100 Gbps. It was jointly networked with the China Star 16 and China Star 19 high-throughput satellites to initially build China's first high-orbit satellite internet that completely covers the entire territory of the country and the “Belt and Road” to jointly build key regions along the “Belt and Road”. The company continues to develop markets while building resources, and has achieved remarkable results.
The company has achieved new breakthroughs in high-throughput satellites and other businesses in the new international market. In the aviation field, it has successfully included the Civil Aviation Administration's front and rear cabin collaborative application pilot project to provide satellite internet services to airlines; in the navigation field, it has added more than 100 high-value commercial ships and passenger ships, and the number of ships on the network exceeds 9,000.
Profit forecast: China SATCOM is the national team operating communications and broadcasting satellites in China. It is optimistic that the company's applications in aviation, navigation and other industries will continue to expand. The company is expected to achieve operating income of 30.88/35.43/3990 billion yuan in 2023-2025, and achieve net profit of 544/6.45/747 million yuan, corresponding to EPS of 0.13/0.15/0.18 yuan. This is the first coverage, giving it a “buy” rating.
Risk warning: The expansion of the satellite application market fell short of expectations, and the satellite had a major failure in orbit.