Incident: The company released its 2023 annual report, achieving full year revenue of 917 million yuan, +36.45% year over year; net profit to mother of 335 million yuan, +0.48% year over year; net profit after deducting non-return to mother of 385 million yuan, +23.23% year over year.
Special functional materials have maintained steady growth. By industry, special functional materials achieved revenue of 887 million yuan, +32.03% year-on-year, gross profit margin of 59.15%, year-on-year -1.87pct; acoustic materials achieved revenue of 0.18 billion yuan, gross profit margin of 32.24%; aerospace parts processing and manufacturing achieved revenue of 0.11 billion yuan, gross profit margin -6.58%. The company's special functional materials grew steadily. At the same time, the company's model tasks continued to increase, and orders for small-batch production of new products increased one after another. The company's gross profit margin was 57.78%, -3.22pct; the net profit margin was 28.28%, -21.3 pct year-on-year. The main reason was that the subsidiary Shanghai Ruihuasheng generated shares and paid 188 million yuan.
Actively prepare production and stock, and subsidiaries increase research and development. On the cost side of the period, sales expenses were 0.15 million yuan, +28.46% over the same period; expenses related to the subsidiaries Huaqin Guangsheng and Huaqin Aviation increased; management expenses were 233 million yuan, +781.37% year-on-year, and the main subsidiary Shanghai Ruihuasheng generated shares and paid 188 million yuan; R&D expenses were 74 million yuan, +18.64% over the same period last year, due to holding subsidiaries Huaqin Guangsheng and Huaqin Airlines increasing R&D investment. Inventory was 125 million yuan, +185.95% compared to the beginning of the period, representing an increase in orders and active production preparation; contract debt of 15 million yuan, +287.73% compared to the beginning of the period, an increase in advance accounts received under sales contracts.
Four stealth material grades have entered an important point, and there are plenty of orders in hand. In October 2023, the company revealed that four brands of stealth material products have entered the small-batch production stage. The company continues to cultivate stealth materials and continuously consolidate its main business circuit. In January 2024, the company signed 2 major daily operating contracts, with a total amount of 642 million yuan; by the end of March 2024, the parent company had signed orders of about 800 million yuan for special functional materials, etc., Huaqin Aviation had signed a total of about 81 million yuan, and had not executed orders of about 55 million yuan (not including the order volume given by the parent company). Ongoing orders were full, which is expected to have a positive impact on current results.
Investment advice: The company's net profit for 24/25/26 is estimated to be 503/7.03/896 million yuan YoY +50.1%/+39.7%/+27.5%. Considering the scarcity of stealth materials, and the company's multiple brands have entered the small-batch production stage. At the same time, it will increase the supporting production and supply of military products to a “buy” rating.
Risk warning: Small-batch production falls short of expectations; downstream demand falls short of expectations.