Event Overview: The company released its 2023 annual report. In 2023, the company achieved revenue of 60.918 billion yuan, a year-on-year decrease of 9.6%; net profit to mother of 570 million yuan, an increase of 91.9% over the previous year; net profit after deduction of 503 million yuan, an increase of 130.4% over the previous year. With 2023Q4, the company achieved revenue of 14.665 billion yuan, a year-on-year decrease of 2.2% and a month-on-month decrease of 5.7%; net profit to mother of 132 million yuan, a year-on-year decrease of 41.4% and a year-on-month increase of 28.2%; net profit after deducting non-return to mother of 130 million yuan, a year-on-year decrease of 32.2% and a month-on-month increase of 21.2%.
Comment: Single-ton profit increased year-on-year
① Volume: Production and sales declined year-on-year in 2023. The company's pipe sales volume in 2023 was 13.5964 million tons, down 0.26% year on year.
② Price: Gross margin increased year-on-year in 2023. In 2023, the unit price of the company's products fell 9.33%, the operating cost per ton fell 10.19% year on year, and the profit per ton increased year on year. In 2023, the company's gross margin increased by 0.92 pct to 2.85% year on year; 2023Q4's gross margin was 2.99%, up 0.17 pct from month to month, up 0.26 pct year on year.
③ The dividend ratio has increased markedly. In 2023, the company distributed a cash dividend of 3.00 yuan (tax included) for every 10 shares, and the cash dividend amount reached 422 million yuan, an increase of 97.01% over the previous year. The dividend payment rate was 74.01%, corresponding to the closing price on April 19. The company's dividend ratio was 4.69%.
Future core focus: National layout, obvious brand scale advantage ① Obvious brand advantage. The company is the largest welded steel pipe R&D, production and sales enterprise in China. The company has always attached great importance to brand building as the number one welded steel pipe production and sales company in the country for 18 consecutive years. The company has two famous trademarks in China, “Youfa” and “Zhengjinyuan”. “Youfa” brand welded round pipes, galvanized round pipes, square rectangular welded pipes, steel-plastic composite pipes, and spiral steel pipes have been awarded the title of “Tianjin Famous Brand Product” by the Tianjin Municipal Government for many years, and “Zhengjinyuan” brand steel pipes have been awarded the title of “Famous Brand Product of Hebei Province”.
② National layout, outstanding scale advantage. The company has a large production and sales scale, many production lines, and complete product specifications, which ensures the timeliness of the company's supply and helps the company achieve full production, thereby reducing production costs and helping to reduce the company's procurement costs. The company has now formed 6 major production bases in Tianjin, Tangshan, Handan, Jiangsu and Shaanxi. By arranging production bases at the cutting edge of the market and at the raw material base, the company can effectively reduce the logistics costs of the company's raw materials and finished products while expanding the scale of production and sales, thereby maximizing the competitiveness of the company's products.
③ Equity incentives help the company develop in the long term. In August 2022, the company announced the “Win-Win One” stock option incentive plan, as well as the “Co-Create One” and “Share One” employee stock ownership plans to fully motivate employees.
Profit forecast and investment advice: The company has always maintained its leading position in the industry. With the gradual investment of production capacity, we believe that the company's net profit for 2024-2026 is expected to be 6.12, 6.75, and 711 million yuan in that order. The PE corresponding to the closing price on April 19 is 15, 14, and 13 times, respectively, maintaining a “recommended” rating.
Risk warning: Prices of raw materials have risen, downstream demand falls short of expectations, and capacity release falls short of expectations.