The capacity utilization rate was under pressure for a short time. We are optimistic that orders and production will increase steadily throughout the year 24Q1, with a cumulative total of about 6.965 billion yuan of new orders, compared to 23Q1. Considering the impact of declining steel prices, we estimate that the actual steel structure processing volume growth rate is or higher than the order amount. The actual order processing volume in Q1 is +3% year-on-year. Production in the first quarter of '24 was 917,900 tons, up 0.09% year-on-year from 23Q1.
Considering the impact of the first quarter including the Spring Festival and the weather in East China, we believe that the company's Q1 capacity utilization rate was under pressure for a short time. We believe that orders and production are expected to maintain a good level of growth in 24 years, driven by a recovery in industry demand.
The price of a single ton was affected by the short-term decline in steel prices. The actual processing volume still increased 22Q1/23Q1/24Q1. The number of manufacturing contracts exceeding 10,000 tons was 17/15/24 in a single quarter, and the number of large orders increased significantly. Among them, there were 9 large high-end manufacturing orders in the 24Q1 single quarter. The price of a single ton ordered by the 24Q1 company was 5000-7000 yuan/ton, which is a certain decrease from the price range of 5,300-7845 yuan/ton ordered by the 23Q1 company (the central price decreased by 8.71%). Steel prices fell 7.47% year on year in the 24Q1 single quarter. If the 23Q1 and 24Q1 steel prices were used as the benchmark and the processing fee of 1,200 yuan/ton was added as the calculation standard, the processing volume corresponding to the new 24Q1 order was 1.354 million tons, an increase of 2.94% year on year, and order processing volume still achieved positive growth.
Government subsidies increase profits and increase the dividend ratio to actively reward shareholders in the 24Q1 single quarter. The company announced that the subsidiary received a total of 56.55 million yuan (before tax) in a single quarter, an increase of 18.98 million yuan over the previous year in 23Q1, an increase of 50.5% over the previous year. The increase in government subsidies is expected to increase profits throughout the year. The company issued an announcement on the “Proposal to Change the Company's 2023 Profit Distribution Plan”, increasing the 2023 dividend ratio from 15.15% to 30.3%, corresponding to the closing price on April 8. The increase in the dividend ratio reflects the company's emphasis on shareholder returns, and is also expected to highlight the company's long-term investment value.
Optimistic about the company's intelligent transformation and medium- to long-term growth potential, maintaining the “buy” rating for 23 years, the company developed a “lightweight arc welding robot intelligent welding system”, which has the ability to integrate ground-rail intelligent welding workstations without teaching. At present, the company's top ten production bases have put into use a small number of Honglu lightweight intelligent welding robots and self-integrated ground-mounted teaching-free intelligent welding workstations. We are optimistic about the quality and efficiency improvements brought about by the company's intelligent transformation. We expect the company's net profit to be 13, 15, and 1.73 billion yuan in 24-26, corresponding PE 9, 8, or 7 times. If given 12 times PE in 24 years, the corresponding target price is 22.68 yuan, maintaining a “buy” rating.
Risk warning: the impact of the continued rise in steel prices on profits exceeded expectations; the company's capacity utilization rate did not increase as fast as expected; and the new supply volume of the industry exceeded expectations.