Net profit to mother in '23/24Q1 was +58.7%/+15.3% year-on-year, maintaining a “buy” rating. According to the company's 2023 annual report, operating income of 1,931 million yuan was achieved in 2023, or +27.3% year over year; net profit to mother was 237 million yuan (in line with previous performance forecasts), +58.7% year over year. According to the company's 2024 quarterly report, Q1 of 2024 achieved operating income of 449 million yuan, -8.1% YoY; net profit to mother was 68 million yuan, +15.3% YoY. We expect the company's net profit to be 342/468/558 million yuan in 2024-2026, respectively, and the corresponding PE is 24/17/14 times, respectively. Comparatively, the company's 24-year Wind unanimously expected an average PE value of 19 times. Considering that the company is a leader in the global chain, it will continue to benefit from the large shipping cycle and high offshore industry boom. The company will be given 33 times PE in 24 years, with a target price of 11.78 yuan (previous value of 11.73) yuan to maintain a “buy” rating.
Profitability continues to rise, and the overall period expense ratio is well controlled
The company's profitability increased significantly, and gross margin showed an upward trend: the comprehensive gross margin in 2023 was 30.6%, +4.58pp; 23Q4/24Q1 gross margin was 39.5% 27.4%, respectively, +6.77/+1.10pp. In terms of the period fee rate, the total cost rate for the 2023 period was 16.60%, +3.75pp compared to the previous year. Among them, the sales/management/ financial/ R&D expense ratios were 4.3%/6.8%/-0.1%/5.6%, respectively, +0.72/+0.09/+2.50/+0.43pp. The increase in the financial fee rate was mainly due to a decrease in exchange earnings in 2023, and the overall fee rate was well controlled during the period.
A leader in the global chain industry, with outstanding competitiveness in multiple fields
The company was founded in 1981. Over the past 40 years, it has successively broken foreign monopolies in marine, offshore, marine, mining and other segments, and has become a leader in the global chain industry. In the field of marine anchor chains, the company's products have been certified by many international classification societies and are a safety guarantee for ship navigation; in the field of mooring chains, the product has completed six updates and iterations, and has successfully independently developed the highest level of R6 mooring chain in the world today, with excellent performance; in the mining field, high-strength mining chains and their supporting accessories have obtained coal safety certification for mining chains, and have become suppliers to many domestic coal companies. In 2023, the company produced 133,000 tons of marine anchor chains, +27.31% year over year; produced 36,000 tons of mooring chain chains, +13.46% over the same period, highlighting the competitiveness of industry leaders.
The upward trend in multiple downstream industries has driven the company to further operate anchor chains and mooring chain products produced by the upstream company, which are key components of offshore mooring and positioning systems, and are supporting industries for the shipbuilding, offshore engineering, and offshore wind power industries. Currently, the company's downstream industries are all showing an upward trend:
(1) China's shipbuilding completion capacity in 2023 was 42.23 million DWT, +11.8% year over year, and new orders reached 71.2 million DWT, +56.4% year over year; (2) Global investment in offshore oil and gas exploration and development in 2023 was about US$186.9 billion, +14% year over year, which has surpassed the industry level before 2019; (3) the cumulative installed capacity of China's offshore wind power in 2023 is expected to reach 36.5 million kilowatts, +19.8% year over year. In the future, the high level of prosperity in the downstream industry is expected to drive the company's operations to improve further.
Risk warning: Industry recovery falls short of expectations; offshore floating wind power development falls short of expectations; fluctuating raw material prices; exchange rate risk.