Incident: The company released its 2023 annual report. In 2023, the company achieved operating income of 8.620 billion yuan, an increase of 30.13%; achieved net profit of 1,102 billion yuan, a year-on-year increase of 38.08%; realized net profit of 947 million yuan, an increase of 38.72%; at the same time, the company released a quarterly report, achieved revenue of 1.78 billion yuan in the first quarter of 2024, an increase of 20.25% over the previous year; achieved net profit of 145 million yuan, a year-on-year increase of 57.39%; achieved net profit deducted from mother of 119 million yuan Yuan, up 76.05% year over year.

Leading the intelligent upgrading of the process industry and continuing to lead in advantageous categories: In 2023, the company is deeply involved in the process industry, grasped the development trend of automation, digitalization and intelligence, built a new “1+2+N” smart factory architecture for the process industry, implemented and applied more than 4,000 sets, leading the new industry standard for smart factory construction. According to Rui Industrial data, the domestic market share of the company's core product distributed control system (DCS) reached 37.8% in 2023, ranking first in the domestic DCS market share for 13 consecutive years. According to China Industrial Control Network statistics, the company's domestic market share of safety instrumentation systems (SIS) reached 33.7%, ranking first in the domestic market share for two consecutive years; the company's advanced control and process optimization software (APC) domestic market share is 28.2%, manufacturing execution systems (MES) domestic process industry market share 20.7%, and operator training simulation systems (OTS) domestic market share is 14%, all leading in the domestic market share.

Actively expanding new products and industries, overseas business is progressing smoothly: in 2023, the company released a new next-generation equipment intelligent sensing platform (PRIDE), iteratively upgraded and released an intelligent operation management and control system (OMC 2.0), and a process industry process simulation and design platform (APEX 2.0), further consolidating the core competitiveness of products and technologies. At the same time, it continues to expand its market share, and its business performance is growing steadily. The company continues to increase the development of non-traditional advantageous businesses and emerging businesses, and has achieved rapid growth in overseas business, oil and gas business, PLC business, battery business, and robotics business. Among them, 2023 was a breakthrough year for the company's international business, and nearly 1 billion yuan of new overseas contracts were signed. The company won the bid for Saudi Aramco Holdings and the Saudi International Maritime Industry (IMI) digital benchmarking project for the world's largest single shipyard, and used this as an opportunity to develop comprehensive in-depth cooperation with Saudi Aramco and IMI. In the future, the company will accelerate the promotion of overseas brand awareness, strengthen cooperation with high-quality customers in various industries, expand channel providers in various regions, and build an international business ecosystem.

Investment advice: As a leader in domestic process automation, the company has formed an overall intelligent manufacturing solution based on control systems, industrial software, and instruments. It is expected to fully benefit from the triple logic of domestic substitution in key links, improving the quality and efficiency of the manufacturing industry, and going overseas along the Belt and Road. We expect the company to achieve revenue of 10.551, 131.39, and 16.261 billion yuan in 2024-2026, respectively. Net profit of 1,327, 15.91, and 1,891 billion yuan was achieved, corresponding to current PE valuations of 28x, 24x, and 20x, respectively, maintaining the “increase in holdings” rating.

Risk warning: Downstream customer investment falls short of expectations, cross-industry customer expansion falls short of expectations, and product development falls short of expectations.