Incident: The company announced that for the full year of 2023, revenue of 432 million yuan decreased by 33.35%; achieved net profit of 67 million yuan, a decrease of 66.59%; and realized net profit of 50 million yuan without deduction of 69.55%. The company's 2023 cash dividend was 0.15 yuan/share, with a dividend ratio of 29.8%. 2024Q1 achieved revenue of 29 million yuan, a decrease of 13.68%; realized net profit attributable to mother of 190 million yuan; realized net profit deducted from non-return to mother - 15 million yuan.
Due to the decline in orders, both revenue and profit have declined since the second half of 2023. On a quarterly basis, the company's Q1-Q4 revenue was 0.34/0.76/0.751 billion yuan, with year-on-year changes of 6.91%/17.64%/-7.85%/-47.11%, respectively; net profit to mother was 0.07/-0.05/0.06/0.59 billion yuan, respectively, down 36.67%/153.90%/63.85%/64.38%, respectively. The decline in revenue and performance in 2023 may be due to 1) a year-on-year decline in production and sales due to a decrease in orders for ultrasonic heat meters, annual smart IoT balance valves, and intelligent modular heat exchange units, and 2) a year-on-year decrease of 13 million yuan in government subsidies.
The main business is expected to benefit from the implementation of the equipment renewal policy, and the subsidiary will expand the semiconductor business to cultivate new growth poles. In March 2024, the State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”, which specifically proposes to promote heating metering and the upgrading of heating facilities and equipment in an orderly manner. Considering the huge heating area in China, demand for services and products related to smart heating is expected to continue to be released. The company has STORMAI's one-stop low-carbon smart heating overall solution with completely independent core technology, which can reduce heat consumption and carbon emissions by 10-30% and reduce electricity consumption by 30-50%, which is expected to benefit from the advancement of energy-saving heating transformation in northern cities. At the same time, in 2023, the company promoted emerging businesses. The wholly-owned subsidiary Hefei Gaona Semiconductor Technology Co., Ltd. is mainly engaged in third-generation semiconductor SiC single crystal growth and equipment research and development, SiC substrate processing, and SiC epitaxial production and sales. During the year, the company focused on developing and producing third-generation semiconductor material silicon carbide crystals. Currently, there are 10 8-inch resistance furnaces and induction furnaces. In 2024, it will continue to accelerate the development of silicon carbide crystals and strive to achieve small-scale mass production as soon as possible.
Investment advice: We expect the company to achieve operating income of 483/563/696 million yuan and net profit to mother of 0.92/1.16/141 million yuan in 2024-2026. The closing price on April 19 was 22.37/17.64/14.53 times PE, respectively, maintaining the “gain” rating.
Risk warning: Delivery falls short of expectations, downstream customer funding falls short of expectations, and seasonal business fluctuations.