Revenue declined but profit continued to grow well. I am optimistic that the company achieved operating income of 2,414 billion yuan in 23 years, or -10.51% year over year, achieving net profit to mother of 218 million yuan, +29.03% year over year, net profit of 208 million yuan after deducting net profit from non-mother, +31.13% year over year. Looking at a single quarter, the 23Q4 company achieved revenue of 997 million yuan, net profit of -7.72% year on year, and net profit of 111 million yuan, and profit increased markedly due to the decline in annual revenue. We judge that on the one hand, due to the contraction of the company's low-margin engineering contracting business, gross margin of the main business of mechanical and electrical engineering and equipment manufacturing improved markedly, and on the other hand, due to impairment losses. 24Q1's revenue and net profit to mother were 3.58 billion yuan and 34 million yuan respectively, -16.1% and +1.84% year-on-year respectively. We believe that the construction of granaries in the 14th Five-Year Plan and cold chain logistics are expected to remain high. At the same time, gross margin may continue to benefit from an increase in the self-supply ratio of equipment. In the medium to long term, the company still has good investment value.
New orders were generally stable, and the gross margin of the main business improved markedly
By business, the company's mechatronic engineering system delivery/design consulting/equipment manufacturing/engineering contracting business achieved revenue of 10.7 billion yuan, 6.1, 5.6, and 110 million yuan, respectively, -1.7%, -19.6%, and -55.5% year-on-year, with gross margins of 17.3%, 42.7%, 20.2%, and 6.9%, respectively, +2.5, -1.1, +7.8, and -0.8 pct. The gross margin of the mechanical and electrical engineering and equipment manufacturing business improved significantly, driving overall profitability upward. At the order level, the company signed new orders of 3,965 billion yuan in '23, +0.53% over the same period last year. Among them, mechanical and electrical engineering, design consulting, and equipment manufacturing businesses were newly signed at 21.78, 760, and 648 million yuan respectively, +1.09%, -7.02%, and +1.89%, respectively.
Cash flow improved markedly, and the company's gross margin in 23 due to a decline in revenue was 24.7%, +4.0pct year over year, 26.7% gross profit margin for 24Q1, and +3.16pct year on year, continuing the trend of improvement. The company's expense ratio for the 23-year period was 12.2%, +1.6 pct. Among them, sales, management, R&D, and finance expenses were +0.01, +0.24, +1.32, and +0.05 pct year over year, respectively. Apart from R&D expenses, the absolute value of other expenses declined to varying degrees, but due to the decline in revenue, various expenses were not effectively diluted. The total asset and credit impairment losses of the company in '23 were 45 million yuan, a year-on-year decrease of 0.19 million yuan. The net interest rate under comprehensive influence was 9.29%, +2.68 pct year-on-year. The net amount of the company's CFO in '23 was 433 million yuan, a sharp increase of 301 million yuan over the previous year. The revenue ratio and cash out ratio were +20.18 and -0.75pct year on year to 114.2% and 87.8%, respectively.
It is expected to benefit from the release of demand for equipment updates. The adjustment to the “increase in holdings” rating takes into account that the company's revenue and performance growth in 23 years fell short of our previous expectations. We expect the company's net profit to be 2.7, 3.2, and 380 million yuan (24-25 years ago), respectively, +23%, +19%, and +19% year-on-year, respectively. As a subsidiary of a central enterprise under the COFCO Group, the company continues to make efforts in the field of grain and oil equipment. We are optimistic about the performance and valuation catalyst brought about by the subsequent market value management assessment by the State Assets Administration Commission and agricultural equipment updates, etc., and adjusted it to a “gain” rating.
Risk warning: Ongoing order execution falls short of expectations, gross margin increase falls short of expectations, and project payback falls short of expectations.