Event: On March 29, 2024, Western Superconductor released its 2023 Annual Report. In 2023, the company achieved operating income of 4.159 billion yuan, a year-on-year decrease of 1.62%; net profit attributable to mother was 752 million yuan, a year-on-year decrease of 30.33%; net profit without return to mother was 631 million yuan, a year-on-year decrease of 35.06%. The company is mainly engaged in R&D, production and sales of superconducting materials, high-end titanium alloy materials and high-performance superalloy materials and applications.
Keep an eye on key material requirements, carry out independent research and development of new technologies, and strengthen R&D team strength and platform construction.
Throughout 2023, the company adjusted its product structure and developed new markets according to national demand and downstream market changes. The company achieved good results in high-end titanium alloy materials in the fields of superconducting products, high temperature alloy materials and aero engines, and was successfully selected as the “2023 National Quality Benchmark”. The annual revenue was basically the same as the same period last year, laying a solid foundation for building new productivity and high-quality development of the company. The company continues to introduce high-quality talents, strengthen R&D team strength and platform construction, and has been approved by the Shaanxi Superconducting Strong Magnetic Field Engineering Research Center and the Shaanxi Aviation Special Metal Common Technology Research Platform. The company adheres to the close integration of R&D and production. On the one hand, a large number of R&D personnel have been working on the production line for a long time, finding and proposing problems in the production process, and solving problems through targeted R&D; on the other hand, they develop new products, new processes, and new technologies by relying on national, provincial and municipal issues, or independently setting up projects for national models or customer needs.
The company's R&D results are directly applied to or guided production, reducing the transformation process of scientific research results, greatly shortening the development and production cycle of new products, which is conducive to rapid market occupation. The company forms a circular model where R&D drives sales and sales guarantee R&D. While generating profits for the company, it also promotes the company's continuous innovation and development. During the reporting period, the company's downstream industrial chain developed well, demand increased steadily, and the research and engineering application of new technologies and industrial capabilities in the titanium alloy, superconducting and superalloy industries were also constantly improving.
The company continues to maintain high investment in R&D, continuously break through technical problems, steadily advance research projects and obtain new model qualifications; continuously improve the level of production informatization, automation and intelligence, tap data value, and promote production efficiency; and deepen zero-defect quality management to meet customer quality requirements.
Focusing on the high-end field, the three core product-related technologies continue to break through. During the reporting period, the company's downstream industrial chain developed well, demand increased steadily, and the research and engineering application of new technologies and industrial capabilities in the titanium alloy, superconducting and superalloy industries were also constantly improving. The R&D results obtained during the reporting period are as follows:
(1) Superconducting product direction: providing key superconducting wires for upgrading monocrystalline silicon magnetic-controlled direct drawing preparation technology in the photovoltaic industry; developing special low-loss superconducting wires to support new requirements for superconducting technology applications in the wind power field; continuing to develop high-temperature superconducting Bi-2212 wire and Bi-2223 strip preparation technology, with comprehensive performance reaching the international advanced level; in terms of high-speed maglev superconducting quantum computers, the company continues to develop new breakthroughs and achieve contract delivery; in terms of high-speed maglev levitation, the company continues to cooperate with application units to develop full-size superconducting superconducting superconducting maglev superconductivity body, implementation Batch manufacturing was carried out; in terms of superconducting magnets for accelerators, the company began delivering ECR ion sources, the core equipment of accelerator systems; completed the manufacture of several superconducting diodes for HIAF projects at the Chinese Institute of Modern Physics; and supplied multiple sets of high-field superconducting magnets for comprehensive physical property measurement systems domestically to serve high-end testing instruments. (2) High-end titanium alloy direction: In response to the country's urgent development needs, it has prepared the largest corrosion-resistant and high-toughness titanium alloy rod/forging blank in China. At the same time, breakthroughs have been made in the development of TiAl high-purity melting technology. The titanium alloy development tasks undertaken in the marine, weapons and nuclear industries are progressing smoothly, providing partners with all products in a timely manner as needed; the company has developed a full range of melting technology for recycling titanium alloys. (3) The direction of high-performance superalloys: It has broken through the full-process preparation technology for high-strength steel bars and small-sized bars for fasteners; the HT700 superalloy independently developed by the company has basically completed the engineering application assessment of the 650℃ ultra-supercritical coal-fired power plant; the company has developed a complete set of melting technology for recycling superalloys.
Net profit declined due to the sales structure; net cash flow declined due to the decline in customer sales repayments. During the reporting period, due to changes in the sales structure, the decline in the company's product gross profit caused operating indicators such as net profit, earnings per share, and return on net assets to decline compared to the same period. In 2023, the company achieved net profit attributable to the parent company of 752 million yuan, a decrease of 30.33% over the same period. Due to the decline in customer sales repayments, the net cash flow from the company's operating activities declined compared to the same period. The company's downstream customers are mainly industry customers. This type of customer procurement and payment generally complies with a strict budget management system, and the payment cycle is relatively long. Therefore, if the company fails to improve cash flow management and is unable to raise the capital required for operations, it may cause the capital to be unable to meet the payment, investment, or debt repayment needs in daily operations, thereby exposing the company to the risk of financial loss or loss of reputation.
Investment advice: The company is mainly engaged in R&D, production and sales of superconducting products, high-end titanium alloy materials and high-performance superalloy materials and applications. It is the main R&D and production base for high-end titanium alloy bars and wires in China; it is also one of the key R&D and production enterprises for high-performance superalloy materials in China. According to model estimates, it is estimated that the company's net profit from 2024 to 2026 will be 967/12.36/1,559 million yuan, EPS will be 1.49/1.90/2.40, respectively, and the corresponding P/E will be 25.9/20.3/16.1 times, respectively. Give it an “gain” rating.
Risk warning: R&D falls short of expectations; risks of orders falling short of expectations; raw material price and supply risks, government subsidies falling short of expectations; macroeconomic instability.