Description of the event

The company released its 23rd annual report, achieving revenue of 3.197 billion yuan, +5.06% year over year; net profit to mother of 461 million yuan, +28.73% year over year; net profit after deducting non-return to mother of 453 million yuan, +26.47% year over year.

23Q4 revenue was 1.50 billion yuan, +76.60% year over year; net profit to mother was 160 million yuan, +110.23% year over year; net profit without return to mother was 162 million yuan, +170.68% year over year.

Incident comments

The core business grew steadily, and changes in the business structure led to profit performance exceeding expectations. 23 The company's gross profit margin for the whole year was 54.19%, +3.81 pct year on year, and 14.63%, and +2.82 pct year on year. It is expected to be mainly due to the increase in explosion-proof product revenue share and the decline in engineering revenue. At the same time, the increase in foreign trade will have a certain driving effect on the overall gross margin. 1) The explosion-proof sector grew steadily. The explosion-proof sector's revenue in '23 was 2,602 million yuan, with a gross profit margin of 56.95%, and the gross profit margin of the main business was basically stable above 55%; 2) The revenue of the professional lighting sector was 268 million yuan, up about 9.5% year on year. The sector maintained moderate growth and waited for further recovery in downstream demand; 3) The new energy EPC business revenue was 274 million yuan, down 41.1% year on year. The sector confirmed that the decline in revenue was the main factor in the company's low revenue growth rate in 23, and the gross profit margin of this sector was low. It is relatively low, but gross margin increased by about 10pct to 25% in '23. 4) Looking at domestic and foreign trade, domestic trade achieved revenue of 2.5 billion yuan, of which security intelligent products achieved revenue of 210 million yuan; foreign trade revenue was 700 million yuan, an increase of about 11.5% over the previous year.

The intelligent safety and control system continues to be optimized to strengthen the domestic and overseas market layout. 1) Domestic trade: In 23, the company further refined the domestic trade market. Currently, it has formed seven major business segment segments: oil and gas chemicals, marine engineering ships, intelligent safety control platforms, chemical machinery equipment, food, medicine and alcohol, military nuclear power, and pyrotechnics. Among them, the security system has gone through many iterations and has now integrated smart lighting control, smart power distribution control, online equipment monitoring, video surveillance management, and smart chemical park management. In 23, the security system achieved sales revenue of 210 million yuan, +17% compared with the same period. 2) Foreign trade: Due to intensive investment in oil and gas projects in the Middle East, Asia Pacific, Africa and other regions, the Belt and Road Initiative has accelerated, domestic equipment has ushered in opportunities. The company has accelerated its overseas market layout, established and put into operation three major overseas operation centers in Europe, Central Asia, and Southeast Asia. The joint venture in Saudi Arabia has entered the registration review stage. As the only enterprise in the explosion-proof electrical appliance industry that exports in bulk, the company will accelerate its global layout and enhance its core competitiveness.

Cash flow is good, shareholder returns are valued, and dividends have continued to be high for many years. The net cash flow from the company's operating activities in '23 reached 627 million yuan, +245.7% year-on-year, reflecting the company's good cash repayment situation. In addition, the company attaches importance to shareholder returns and has maintained high dividends for many years. The company plans to distribute a cash dividend of 10 yuan for every 10 shares in '23, for a total of about 338 million yuan (tax included).

Maintain a “buy” rating. According to the company's 24-year financial budget report, management expects revenue of about 4,080 billion yuan for 24, an increase of about 27.6% over the previous year. We believe that the company's main explosion-proof business is expected to benefit from the layout of the seven major business segments and foreign trade expansion, and that the new energy EPC delivery situation and demand for professional lighting are expected to be repaired, and the company's performance is expected to continue to grow steadily. In 2024-2026, the company is expected to achieve net profit of 5.5, 6.6, and 770 million yuan, corresponding to PE 13, 11, and 10 times.

Risk warning

1. The risk of developing new fields falling short of expectations;

2. The risk that the global layout falls short of expectations.