The company returned a net profit of 130 million yuan to its mother in 23 years, maintaining a “buy” rating
The company achieved revenue of 2.47 billion yuan (yoy +7.2%), net profit of 130 million yuan (yoy +97.1%); 24Q1 achieved revenue of 640 million yuan (yoy +7.5%, qoq +11.9%), and net profit of 50 million yuan (yoy -30.9%, qoq +209.2%). Since the sales volume of the company's main products was lower than our previous expectations, the 24-25 sales assumption for the main products was lowered. The final net profit of the company is estimated to be 270/3.46/414 million yuan for 24-26 (previous value: 3.80/4.79/100 million yuan). Using segmented valuation, the energy saving and environmental protection business profit is expected to be 173 million yuan and the new materials business profit is 97 million yuan. Comparatively, the company's average PE value for 24 years is 11x/19x. Considering the company's good transformation results and broad downstream application space in the materials business, the 24-year 18/32PE was given, respectively, corresponding to a target price of 6.84 yuan (previous value of 8.57 yuan), maintaining a “buy” rating.
The energy saving and environmental protection business is steady; the materials business is being integrated and optimized
The company's energy saving and environmental protection business was stable in '23, accounting for about 67% of gross profit; gross profit increased 24.09% year over year, faster than the 8.94% year-on-year growth rate of revenue; the company mainly focused on industrial heat transfer and water treatment, while actively developing extraction and separation businesses (mainly for hydrometallurgy, rare earth separation, salt lake lithium extraction, etc.). In terms of materials business, the company divested part of the business where performance declined significantly, and integrated target materials with ultra-high temperature special functional materials. The combined revenue of the target materials, ultra-high temperature special functional materials, and new military-civilian hybrid polymers and composite materials business in '23 was +3.7% (-9.5% compared to the same period in '22), and the total gross profit ratio was -12.9% (-27% compared to the same period in '22). The materials business is likely to bottom out.
The downstream application space of the materials business is broad
The company focuses on traditional business, deeply cultivates the “energy saving and environmental protection” sector, focuses on innovative industries, lays out the “new materials” sector, and opens up a new track for the photovoltaic and wind power new energy industries, forming an industrial pattern of “energy saving and environmental protection” + “new materials”. The field of electronic materials mainly focuses on targets in the field of display panels and targets in the field of solar cells, and has successfully entered companies such as BOE, TCL Huaxing, and Korean LGD; in the photovoltaic field, the company's ceramic series target products have been certified by mainstream photovoltaic enterprise customers, and is also carrying out research on various novel targets suitable for heterostructures, perovskite, and laminated batteries. Polymer composites mainly serve various fields such as military industry, rail transit, wind power, shipbuilding, and special vehicles; for example, the subsidiary Zhaoheng Technology's PMI foam products are mainly used in aerospace, medical, and sports equipment.
Risk warning: Significant fluctuations in raw materials have caused asset depreciation, downstream demand falls short of expectations, and technological revolution has led to material replacement.