Incident: After the market on April 22, the company released its 2023 annual report and 2024 quarterly report.
The performance was in line with expectations; net profit to mother increased 59% year on year in '23, up 15% year on year 24Q1. In 2023, the company achieved operating income of 1,931 billion yuan, up 27.34% year on year; net profit to mother was 237 million yuan, up 58.71% year on year. Looking at the breakdown, marine chains and accessories achieved sales of 133,300 tons, up 27.31% year on year, revenue of 1,352 billion yuan, up 23.00% year on year; mooring chains achieved sales of 35,800 tons, up 13.46% year on year, and revenue of 559 million yuan, up 41.02% year on year. In 2023, the company received orders of 180,600 tons, an increase of 12.7% over the previous year, including 151,600 tons of marine anchor chains and accessories, and 29,000 tons of mooring chains.
The 2024Q1 company achieved revenue of 449 million yuan in a single quarter, down 8.14% year on year and up 1.9% month on month; net profit to mother was 68 million yuan, up 15.3% year on year and 11.9% month on month. The year-on-year decline in revenue was mainly due to the high base for the same period last year.
Profitability continued to improve. Gross margin increased 4.58 pct year on year in 2023, and profitability increased 1.1 pct year on year in 24Q1: gross sales margin and net margin were about 30.59% and 12.14% respectively in 2023, up 4.58 and 2.31 pct year on year. Among them, the gross profit margin of marine chains and accessories was 25.52%, up 3.19 pcts year on year; the gross profit margin of mooring chains was 41.59%, up 7.46 pcts year on year. 2024Q1's gross profit margin in a single quarter was 27.45%, up 1.1 pct year on year, down 12.06 pct month on month; net sales margin was 15.33%, up 3.08 pct year on year, up 2.26 pct month on month. The significant month-on-month decline in 2024Q1 gross margin may be due to changes in product structure.
Expense side: The cost rate during 2023 was 16.6%, an increase of 3.75pct over the previous year, mainly due to the increase in the financial expense ratio. Among them, sales, management, R&D, and finance cost ratios were about 4.29%, 6.79%, 5.58%, and -0.05%, respectively, increasing 0.72, 0.09, 0.43, and 2.5 pct year-on-year, respectively. The cost rate during 2024Q1 was 15.1%, up 0.7 pct year over year.
Global anchor chain leader, rising ship oil service cycle and continuous growth driven by floating wind power expansion 1) Shipbuilding industry: ship exchange cycles+environmental restrictions contributed to the explosion of shipbuilding orders, and the industry entered a medium-term boom period. The company is actively expanding its categories and will launch marine steel castings (such as anchors) in 2023. The company's flexible performance in the shipping industry is mainly due to increased demand and category expansion in the marine chain.
2) Offshore oil and gas industry: The company's mooring chain is used to support the construction of new offshore oil platforms and the replacement of old platforms. As of 2024-4-19, the price of Brent crude oil was 88.25 US dollars/barrel, and global oil prices were at a high level. The global oil and gas market is in a major recovery cycle. Benefiting from increased exploration and development intentions and capital expenses of oil and gas companies, demand for addition+renewal of oil and gas preparations is expected to be released. The company is expected to benefit from increased utilization of production platforms and increased willingness to spend capital in the offshore oil and gas industry.
3) Floating offshore wind power: The ocean landscape continues to improve, and deep-sea floating wind power is gradually getting closer. The company has strong technical strength in its mooring chain. It has won bids for several floating wind power projects, and it is expected that priority will be given to the development of floating offshore wind power. The Hainan Wanning floating wind power project is the world's largest commercial floating wind power project, and its progress is of great significance to the industry. At present, manufacturers have won the bid for the first batch of 100MW wind turbines, and the mooring chain tender is expected to start at an accelerated pace. If the cost of the first phase of the project falls to the expected level, commercialization will accelerate.
4) Mining chains: Mainly used in transmission chains such as scraper conveyors and transfer machines in coal mining, and ring chains for slag scavengers in thermal power plants, they have strong consumable properties. Currently, the average annual market space of nearly 2 billion dollars is mainly occupied by overseas companies such as German Tyler. The company has already won multiple mining chain orders such as China Energy and China's Shenhua. It is expected that subsequent companies will benefit from domestic replacement of mining chains using leading technology in ship anchors and offshore mooring chains.
According to the current situation in the shipbuilding industry and offshore industry, the company plans to complete revenue of 2.32 billion yuan in 2024, with a simultaneous increase of 20.7%, including 1.68 billion yuan for ship anchors and accessories, an increase of 24.2% over the previous year, and 640 million yuan for marine engineering mooring chains and accessories, an increase of 14.5% over the previous year.
Profit forecast and valuation: Optimistic about the company's major development in the field of wind power and emerging applications, the 2024-2026 net profit is 3.02, 3.97, and 508 million, up 28%, and CAGR = 30%. The corresponding PE is 27, 20, and 16 times, maintaining the “buy” rating.
Risk warning:
1) The boom in the shipping industry falls short of expectations; 2) The industrialization process of floating wind power falls short of expectations.