Description of the event
The company released its 2023 annual report, achieving full-year revenue of 13.309 billion yuan, an increase of 3.95%; realized net profit of 1,216 billion yuan, an increase of 0.48%; and realized net profit of 1,124 billion yuan without return to mother, a decrease of 0.17%.
Incident reviews
The two main businesses, gas sales and air separation equipment, have achieved steady growth. By product, gas sales, air separation equipment, ethylene cold box products, others, and general engineering contracts achieved revenue of 81.94, 42.39, 4.85, 3.02, and 89 million yuan respectively, with year-on-year growth rates of 2.33%, 5.67%, 8.56%, 46.23%, and -31.90%, respectively.
The decline in gas prices affected the overall gross profit margin, and the cost rate remained stable. The company's overall gross margin decreased by 2.58 pct to 22.91%. Among them, the gross margin of air separation equipment also increased by 4.77 pct to 31.52%. Gas sales were affected by price declines, and gross margin decreased by 6.54 pcts to 18.75%.
In terms of the cost ratio, the company's cost ratio increased 0.32 pct to 11.58%, and remained stable. Among them, the sales expense ratio increased 0.27 pct to 1.41%, the management expense ratio also increased 0.12 pct to 5.99%, the financial expense ratio also increased 0.15 pct to 0.77%, and the R&D expense ratio also decreased by 0.21 pct to 3.40%.
Accelerate gas investment layout and enrich gas product categories. The company signed several new gas investment projects throughout the year, including Shandong Hangzhou Oxygen, Henan Jinkai, and Shanxi Tianze, etc., with an oxygen production capacity (nitrogen containing project) of 450,000 Nm3/h. As of 2023/12/31, the gas investment had a cumulative oxygen production volume of 3.2 million Nm3/h. At the same time, the company signed a new Indonesian gas project, taking the first step in the internationalization of the gas industry; the business layout achieved a new breakthrough in provincial coverage, and landed the first gas project in Sichuan and Chongqing. In addition, the company accelerated the integration of Mergers and Acquired SEAT Electronics and Wanda Gas to diversify specialty gas product categories; it made a major breakthrough in the supply of helium, becoming the first domestic company that also independently developed and successfully developed liquid helium tanks and achieved mass production, directly imported helium sources, and had the ability to guarantee the supply of electronic-grade helium gas.
Equipment orders remain high to ensure future performance. The company signed new equipment sales contracts of 6.47 billion yuan throughout the year, of which the annual foreign trade contract amount reached 908 million yuan, accounting for 14.03%, of which the proportion of overseas sales contracts for cryogenic petrochemical equipment increased to 53%. In addition, ethylene cold boxes, liquid nitrogen washing cold boxes, and alkane dehydrogenation devices continue to occupy leading positions in the domestic market.
Profit forecasting and valuation
The company's 2024-2026 revenue is expected to be 152.46, 170.35, and 18.831 billion yuan, with year-on-year growth rates of 14.56%, 11.73%, and 10.55%; net profit to mother is 13.76, 15.63, and 1,757 billion yuan, with year-on-year growth rates of 13.16%, 13.59%, and 12.41%. The company's 2024-2026 performance corresponding PE was 21.49, 18.92, and 16.83 times, respectively. It was covered for the first time, and a “gain” rating was given.
Risk warning:
Gas prices are falling; production capacity is falling short of expectations; market competition is increasing risks.