Event: The company released its 2023 annual report. In 2023, the company achieved revenue of 641 million yuan, a year-on-year increase of 5.60%, and net profit of 76 million yuan, an increase of 3.76% over the previous year.

Both revenue and net profit increased, and gross margin improved significantly. According to the company's 2023 annual report, in 2023, the company achieved revenue and net profit of 641 million yuan and 67 million yuan, respectively, up 5.60% and 0.81% year-on-year, mainly due to sufficient orders from various business segments of the company. In particular, the amount of new contracts for high-speed rail fasteners increased rapidly, and orders continued to increase; gross margin reached 28.39%, an increase of 2.70 pct over the previous year, with a significant increase in profitability.

The development of new products has been accelerated, and the R&D results are remarkable. According to the company's 2023 annual report, in 2023, the company achieved remarkable research and development results in railway fasteners and electronic components: 1) The company made significant improvements in the application of high-precision capacitors, and made breakthroughs and industrialization in lithium battery rubber plugs, rubber seals resistant to ultra-high voltages above 550V and 150℃, and axial capacitor cover technology; 2) In the field of rail fasteners, the company developed 63 new products throughout the year, including related products from the Academy of Iron and Steel, and overseas fasteners. Successful R&D and industrialization , the research and development of intelligent orbital inspection equipment is progressing smoothly. In addition, the company successfully passed the CRCC certification review and obtained certificates for fastener components such as high-speed railways, passenger and cargo lines, heavy duty railways, urban rail transit, rail guards, etc., and participated in the formulation of the national standard GB/T19390-2023 “Polyester Rubber Cord Cloth for Tires”. Eleven new authorized patents were added throughout the year, including 6 new invention patents.

Multiple cash dividends have been paid, and emphasis is placed on giving back to shareholders. According to the company's 2023 annual report, in 2023, the company implemented a profit distribution plan for 2022, with a total cash dividend of 31.83 million yuan, and a dividend payment rate of 47.86%. Since listing in 2017, the company has distributed profits every year, and the cumulative dividend amount in 2017-2022 reached 186.07 million yuan, accounting for an average of 42% of the company's net profit returned to mother.

Investment advice: We expect the company to achieve operating income of 721 million yuan, 841 million yuan and 1,002 billion yuan respectively in 2024-2026, and realized net profit of 85 million yuan, 95 million yuan, and 107 million yuan respectively, up 26.1%, 12.0% and 13.1% year-on-year. The corresponding EPS is 0.34 yuan, 0.39 yuan, and 0.44 yuan, respectively. The PE multiples corresponding to the current stock price are 30X, 27X, and 24X, respectively. Considering the growth space of the company's rail transit industry and electronic component parts industry, and the company's layout results in the upstream new materials field have already been shown, a certain valuation premium has been given to maintain the “buy” rating.

Risk warning: the risk of railway construction falling short of expectations, the risk of urban rail transit construction falling short of expectations, the risk of increased market competition, and the risk of rising raw material prices.