Net profit to the mother was +1% year over year in 2023, the profit forecast was lowered and the target price HuaTest released the annual report. In 2023, it achieved revenue of 5.61 billion yuan (+9% YoY), net profit to the mother of 910 million yuan (+1% YoY), and deducted non-net profit of 780 million yuan (-2% YoY). Of these, Q4 achieved revenue of 1.52 billion yuan (+0.5% YoY) and net profit of 170 million yuan (-29% YoY). Due to changes in external environmental factors, life science and medicine revenue forecasts were lowered; with profit forecasts lowered, we expect the company's EPS for 24-26 to be 0.62/0.74/0.82 yuan, respectively (previous value 0.77/0.93/- yuan). Comparatively, the company's 24-year Wind unanimously expected an average PE value of 22x. Considering that the company's diversified business layout showed strong resistance to cyclical fluctuations, the 24-26 net profit CAGR is expected to be no less than 15%, and the 24-26 net profit CAGR is expected to be no less than 15%. The company was given 30xPE for 24 years, with a target price of 18.60 yuan (previous value 22.05 yuan), maintaining a “buy” rating.
Industrial testing and consumer goods testing revenue grew rapidly, and the pharmaceutical sector was under pressure for 23 years: 1) Life sciences: revenue of 2.50 billion yuan (YoY +8.7%), gross profit margin 47.9% (YoY -1.2pp), pet food and supplies testing market share increased, and demand for cosmetic efficacy testing declined; 2) Pharmaceuticals: Revenue of 340 million yuan (-38.9% YoY), gross profit margin 39.0% (YoY -7.2pp), demand affected by special medical remediation actions; 3) Industrial testing: Revenue 1.09 billion yuan (YoY +) 20.7%), gross profit margin of 43.6% (+3.0pp), energy and marine inspection demand increased; 4) Trade assurance: revenue of 7.0 billion yuan (+5.6% YoY), gross profit margin 64.6% (YoY -1.3pp), declining demand for airport elimination; 5) Consumer goods testing: Revenue of 980 million yuan (+36.7% YoY), gross profit margin of 44.8% (-3.8pp). The NEV/Vehicle Networking/Wireless Communications sector maintained high growth.
Net profit margin for 24Q1 fell 1.8pp year on year. Mainly affected by the decline in gross margin, 24Q1 achieved revenue of 1.19 billion yuan, +6.7% over the same period last year. Demand for testing needs to recover. 24Q1 gross margin was -1.9pp to 45.3% yoy, but compared to the quarterly low of 23Q4, +3.5pp month-on-month. The company continued to promote refined management, but the 24Q1 expense ratio remained stable year over year and failed to offset the impact of the decline in gross margin. Asset and credit impairment losses increased year-on-year, resulting in net interest rates falling to 11.1% year-on-year (23Q1:
12.9%, 22Q1:13.1%).
Operating cash flow fluctuated, and the balance and liability structure advantages highlighted that the 23Q4/24Q1 operating cash had a net inflow of 720 million yuan (+10.6% year over year)/net outflow of 170 million yuan, respectively, with a revenue ratio of 116%/97% (+7.5/-8.1 pp), respectively. 23Q4/24Q1 The company's capital expenses (cash outflow from the purchase and construction of fixed assets, etc.) were -20.7%/-20.2% year-on-year, which was lower than the revenue growth rate. As of the end of March '24, the company's balance ratio was 22.2% /yoy-2.9pp, which is lower than most comparable companies.
Risk warning: The progress of mergers and acquisitions fell short of expectations, new business expansion fell short of expectations, and competition in stock business intensified.