There was a high increase in new orders in 2023, benefiting from the high net profit from the merger and acquisition of Zijin Pharmaceuticals in 2024Q1, and the company achieved revenue of 808 million yuan in 2023, +47.47% year over year, net profit to mother of 90.33 million yuan, +36.39% year over year, net profit after deducting 75.28 million yuan without return to mother, +35.02% year over year. The 24Q1 company's revenue was 104 million yuan, +2.57% year over year, net profit to mother was 79.42 million yuan, +492.69% year over year (of which the merger and acquisition of Zijin Pharmaceutical brought investment income of 61.63 million yuan), net profit after deducting net profit of 15.51 million yuan, +43.38% year over year. We expect the company's 2024-2026 net profit to be 2.01/235/291 million yuan, corresponding to PE14/12/10 times PE. Comparatively, the company consistently expected PE to be 22 times in 24 years, giving the company 22 times PE in 24 years, corresponding to a target price of 46.64 yuan (previous value of 48.72 yuan), maintaining a “buy” rating.

There was a high increase in new orders in 2023, and the solution revenue growth rate was faster. The company's 23-year solution revenue was 460 million yuan, +88.03% year on year, gross profit margin of 22.71%, year-on-year -6.79pp, operating service revenue of 193 million yuan, -0.96% year on year, gross profit margin of 32.78%, sales products (pharmaceuticals and equipment) of 137 million yuan, +41.69% year on year, gross profit margin of 45.30%, year-on-year +3.56pp. The gross profit margin for '23 was 28.83%, -1.88pp year on year, mainly due to a decline in the gross margin of the solution. New solution orders in '23 increased by more than 50% year over year, with technical service orders reaching a record high. Considering the company's “growth” to “storage” characteristics, solution revenue will gradually be transformed into post-market businesses such as operating services and pharmaceuticals with higher gross margins in the future. Considering the rapid growth in solution orders and revenue in 23, it is expected to drive the company's market business revenue and overall profit margin after 24-25 years.

Expense rates increased in 2023 and 24Q1. 2024Q1 gross margin improved, and the total cost rate for the 2023 company period was 16.91%, +0.43pp year on year. The total rate rate for the 2024Q1 company period was 27.80%, +10.14pp year on year. The gross margin of 2024Q1 Company reached 40.13%, +9.61pp, the net sales margin was 77.51%, +63.22pp, and the net profit margin after deducting non-sales was 14.88%, +4.23pp. The increase in net sales margin was also listed with Q1 Zijin Pharmaceuticals. The company originally held 39% of Zijin Pharmaceutical's shares and generated an investment income of 61.63 million yuan. The company strengthened collection of past accounts receivable, and 24Q1 credit impairment losses were reduced.

The merger and acquisition of Zijin Pharmaceutical has been completed, and overseas business is expected to expand at an accelerated pace. Optimistic about the company's revenue and profit growth in 24 years, the company completed the acquisition of the joint venture Zijin Pharmaceuticals in February 2024. Zijin Pharmaceutical's gross margin from January to September 2023 was 40%, which is higher than the gross profit margin of the company's main business. Its products are copper extractants, which are used downstream in wet copper smelting processes, and are in synergy with the company's environmental chemicals in customer and other processes. In 2023, the company used Serbian and Australian subsidiaries as the fulcrum, and overseas orders increased by 51%. The focus was on achieving the successful acceptance of the first phase of the Norton project in Australia, the implementation of continuous operation services following the project, and the successful delivery of all equipment for the Kinkamoa smelter project in the Congo. The gross margin of the company's overseas business reached 56.70% in '23, +6.38pp year on year, accounting for 11.79% of revenue. Considering the impact of the company's overseas business expansion and Zijin Pharmaceutical's combined effects, the company's revenue and gross margin are expected to continue to increase in 24 years.

Risk warning: The marketing of new technology is unfavorable, accounts receivable balances are large, and customer concentration is high.