Event: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 1.21 billion yuan, +23.1% year-on-year; realized net profit of 140 million yuan, +17.3% year-on-year. 2024Q1 achieved revenue of 290 million yuan, +5.8% YoY, +4.5% month-on-month; realized net profit to mother of 282.19 million yuan, -7.4% YoY and +54.6% month-on-month.
The production capacity of new equipment has been rapidly increased, and finishing and surfacing technology have increased the added value of products. By product, in 2023, revenue for special parts for oil and gas production systems was 960 million yuan, +30.2% year on year; revenue for special parts for unconventional oil and gas extraction was 130 million yuan, -16.2% year over year; revenue for special parts for well control devices was 50 million yuan, +46.6% year over year.
By region, in 2023, the company's overseas business revenue was 830 million yuan, +38.0% year on year; domestic business revenue was 320 million yuan, -5.8% year over year. Since the 70MN free forging equipment was put into operation, the company's production capacity was quickly released. At the same time, the company continued to strengthen the development of high-value-added products, and production equipment for finishing and surfacing welding has been normalized.
24Q1 Profitability improved month-on-month, and cost control capabilities continued to be optimized. In 2023, the company's gross profit margin and net profit margin were 22.0% and 11.8%, respectively, -1.3pp and -0.6pp; the period expense ratio was 8.9%, -0.4pp. In 24Q1, the company's gross profit margin and net margin were 19.5% and 9.9%, respectively, -3.4pp, -1.4pp, month-on-month +2.0pp, and +3.2pp; the cost ratio for the period was 7.7%, -3.6pp, and -3.2pp.
The offshore oil and gas boom continues, and high-margin deep-sea products continue to benefit. According to S&P Global, global oil demand will continue to grow in 2024, and global upstream exploration and development capital expenditure is estimated at around US$607.9 billion. The year-on-year increase was 5.7%, with offshore exploration and development capital expenditure growing at a rate of 19.5% year-on-year. Judging from the development of oil and gas extraction, the oil and gas extraction structure will follow the trend from conventional oil and gas to unconventional oil and gas, from terrestrial oil and gas to marine oil and gas, and from shallow to deep sea. The company continues to increase investment in deep-sea product research and development and transformation into the deep-sea product market, and high-margin deep-sea products contribute to the main increase in performance.
The fund-raising project is progressing smoothly, and high-end valves are expected to become the company's second growth pole. The 350MN multi-directional die-forging hydraulic press in the company's fund-raising project is mainly used to produce high-end valve and pipe parts products. After the project is put into operation, it will further increase the company's product range in the oil and gas field. At present, most of the equipment has entered the installation and commissioning stage, and the project is progressing in an orderly manner. The new product, high-end valves, is expected to create the company's second growth curve.
Profit forecasting and investment advice. The company's net profit from 2024-2026 is estimated to be 1.9, 2.4 billion yuan, and 290 million yuan, respectively, and the corresponding EPS is 0.97, 1.24, and 1.50 yuan, respectively. Corresponding to the current share price PE, it is 17, 13, and 11 times, respectively. The compound net profit growth rate for the next three years will be 27%. The company continues to benefit from the boom in offshore oil and gas as a leading domestic oil and gas equipment manufacturer and maintains a “buy” rating.
Risk warning: Risks such as fluctuations in oil and gas prices, falling short of expectations in overseas business expansion, rising raw material prices, and falling short of expectations in fund-raising projects.