Incident: The company released its 2023 annual report. In 23, the company achieved revenue of 2.16 billion yuan, +14.3% year on year; net profit to mother was 190 million, +34.7% year on year; single Q4 achieved revenue of 650 million yuan, +0.5% year on month, +18.2% month on month, net profit of 50 million yuan, +59.5% year on month, and -0.8% month on month. Overseas business drives the company's revenue growth and profitability.
The share of confirmed revenue from high-margin overseas projects increased to 42%. Expenses were well controlled during the period, and the company's profitability increased. In '23, the company's comprehensive gross margin was 22.5%, +2.4pp year on year. The increase in gross margin was mainly due to the increase in the share of the company's overseas business with high gross margin from 15.5% to 42.4%, and overseas business repayment was superior to domestic business; the net margin increase was less than the gross margin mainly due to the company's asset impairment and an increase of about 4.4 million; the cost ratio for the period was 8.0%, -0.8pp. Looking at the breakdown, sales, management, R&D and sales expenses rates were +0.05pp, +0.35pp, - 0.23pp, -0.96pp. The increase in the financial expense ratio was mainly due to exchange rate changes and an increase in interest income from deposits.
High revenue growth in overseas markets drove the company's performance growth, and domestic sales were under pressure due to domestic project delivery. In '23, the company achieved domestic sales of 1.23 billion, or -22.0% over the same period. This was mainly due to a decrease in domestic project delivery, and domestic competition was intense, and the gross margin of domestic sales fell 1.96pp to 15.0%. Aiming at overseas markets, the company focused on improving project delivery capacity, increasing delivery and confirmed revenue. It achieved export sales of 9.1 billion yuan, +212.2% over the same period, and the gross margin decreased by 5.28pp to 32.8% due to the project structure; and the overseas market continued to expand. While consolidating traditional advantageous markets such as the Middle East, Southeast Asia, Japan and South Korea, it successfully developed new markets such as South America and signed several new product projects, such as the first coil heat exchanger project exported overseas for large-scale liquefied natural gas installations, the company's first 90,000-grade oversized air separation equipment, and 500,000 square meters of overseas production Overseas markets are being further expanded, such as the /day LNG project, which is expected to help the company continue to improve its performance.
The company's market is developing smoothly, new orders are sufficient, and the future of the company's development can be expected. In 2023, the company reached a new record high of about 4.1 billion (tax included), +8.6% over the same period last year. Over the past three years, the total number of new orders signed has exceeded 10 billion, and there are enough orders in hand. The company has obvious cost performance advantages. It has a strong cost advantage in international market competition in the Middle East, Southeast Asia, Central Asia and South America. It is expected that it will continue to benefit from “Belt and Road” overseas exports and promote steady growth in the company's revenue and profit.
Profit forecasting and investment advice. The company's net profit for 2024-2026 is estimated to be 2.6, 360, and 49 million yuan, corresponding EPS of 1.65, 2.22, and 3.05 yuan. The current stock price corresponds to PE of 12, 9, and 6 times, and the compound growth rate of net profit to mother over the next three years is 37%, maintaining a “buy” rating.
Risk warning: Risks such as downstream demand falling short of expectations, production expansion falling short of expectations, and customer project progress falling short of expectations.