Incident: In 2023, the company achieved operating income of 15.12 billion yuan, an increase of 3% over the previous year; achieved net profit of 550 million yuan, an increase of 35% over the previous year; net profit after deducting non-return to mother was 420 million yuan, an increase of 25.8% over the previous year. In the fourth quarter of 2023, the company achieved revenue of 3.38 billion yuan, a year-on-year decrease of 8.3%; realized net profit of 80 million yuan, an increase of 2% over the previous year; net profit after deducting non-return to mother was 40 million yuan, an increase of 57.4% over the previous year.
Profitability continues to increase, and R&D expenses remain high. Profit side: In 2023, the company's gross sales margin/net margin was 14.3%/3.7%, up 0.7/0.9pp; the Q4 gross margin/net margin was 11.2%/4.2%, respectively, up 0.2/0.8pp from month to month. Expense side: The company's 2023 sales/management (excluding R&D) /financial expenses were 4.1%/2.4%/0.6%, respectively, -0.2 pp/+0.2 pp/+0.3 pp, respectively.
The company's R&D expenditure rate in 2023 was 4.2%, an increase of 0.04pp over the previous year, and R&D investment was further increased.
The acceleration of polymer materials going overseas, and the release of ultra-high pressure production capacity drives product structure optimization. In 2023, the company's polymer materials achieved revenue of 4.87 billion yuan, a year-on-year increase of 4.7%, gross margin of 16.7%, a year-on-year increase of 1.3 pp. The company's net profit increased by more than 30% year-on-year through measures such as scale effects and increased profits for high-end products. In addition, the company's overseas sales volume of polymer materials increased 35% year-on-year in 2023, reaching nearly 100,000 tons of shipments. Since formulating an international strategy in 2019, sales volume growth of more than 500% has been achieved within 5 years. The company's overseas business covers Southeast Asia, South America, Central Europe, Africa and other regions, and the global market share is expected to gradually increase. The company's UHV Phase II will be fully put into operation in 2023, and the official launch of the Phase III base is expected to contribute additional volume in 2024. As the share of high-voltage grade products increases, the gross margin of polymer materials is expected to continue to grow.
The pile sales business has started, and the integrated ecological layout of charging piles has been perfected. The company's trade and other sectors achieved revenue of 500 million yuan in 2023, up 38.4% year on year, gross margin of 19.3%, up 3.6 pp year on year. The company's business in this sector is mainly charging station operation and pile sales business. In 2023, the company accelerated the formation of a “moderately advanced, fast charging as the main focus, and slow charging as a supplement”, achieving a two-year increase of 33% year-on-year sales of charging equipment. Along with the increase in pile sales volume, the company has formed an ecological layout of “smart equipment manufacturing+network operation service+investment in the construction of a charging network+vehicle operation industry chain”, covering more than 50 cities across the country.
Industrial smart cables achieved a breakthrough of zero exports to Europe and the US, and the company's technical strength is leading the industry. In 2023, while developing international giant customers, the company further expanded the scope of cooperation with KUKA, which it had worked closely with before. 1) Lithium battery:
The company's equipment cables simultaneously met both American and European export standards, and achieved a breakthrough of 0 to 1 in the first lithium battery production line of an established European car company. 2) Photovoltaics: We have completed the development and production of high-demand towline cables for equipment. The technical performance of the product is superior to its peers, and it is expected to benefit from large customers and bring business growth.
Profit forecasting and investment advice. The company's revenue for 2024-2026 is estimated to be 17.42 billion yuan, 20.08 billion yuan, and 22.71 billion yuan respectively, and net profit to mother will grow at a year-on-year rate of 37.9%/28.5%/21.4% for the next three years, respectively.
The company is a leader in polymer materials in China, and is expected to achieve a double increase in volume and profit along with the release of production capacity, maintaining a “holding” rating.
Risk warning: the risk that downstream demand for cables falls short of expectations; the risk that the progress of new construction projects falls short of expectations; the risk of fluctuations in the macroeconomic situation; the risk that exchange rate fluctuations affect product export revenue.