Incident: On April 16, the company released its 2023 annual report and 2024 quarterly report. Among them, the company achieved revenue of 2,789 million yuan, -1.64% year on year, realized net profit of 126 million yuan, +20.75% year on year, realized net profit without return to mother of 117 million yuan, +31.68% year on year; achieved revenue of 625 million yuan in the first quarter of 2024, +3.64% year over year, achieved net profit to mother of 34 million yuan, or +88.70% year on year.
The overall revenue scale is stable, profitability continues to increase, and high-end market development boosts 2024Q1 off to a good start.
(1) Growth: In 2023, the company achieved revenue of 2,789 million yuan, down 1.64% year on year, and achieved net profit of 126 million yuan, up 20.75% year on year, in line with expectations; in the first quarter of 2024, revenue of 625 million yuan, up 3.64% year on year, achieved net profit of 34 million yuan, an increase of 88.70% year on year, and the results started off well. By product, the revenue of stainless steel decorative panels and textile carding equipment in 2023 was 1,953 million yuan and 519 million yuan respectively, -7.70% and +4.66% year-on-year, respectively. We judge that the revenue of stainless steel decorative panels declined slightly due to the fall in stainless steel raw material prices in 2023; the company's high-end transformation and upgrading trend in the textile carding equipment sector is obvious, and product development results are remarkable, and it is expected that the market share of high-end products will be further increased in the future.
(2) Profitability: In 2023, the company's gross margin and net margin were 15.44% and 4.50%, respectively, up 1.31pct and 0.82pct, respectively. In the first quarter of 2024, the company's gross margin and net interest rate were 18.09% and 5.52% respectively, increasing 2.71 pct and 2.48 pct, respectively. We determine that the main reason was that the company focused on high-end customers and continued to optimize the product structure. The sales share of high-end products gradually increased.
(3) Cash flow: The net cash flow generated by the company's operating activities at the end of each year since 2018 has been positive. In 2023, the net cash flow from the company's operating activities was 242 million yuan, exceeding the current profit level, which fully proved the steady nature of the company's operations.
The recovery in industry sentiment has brought about an increase in demand, and the joint strength of 2 core businesses+2 extended industries is expected to usher in high growth.
(1) Textile carding equipment: In November 2023, four departments including the Ministry of Industry and Information Technology and the National Development and Reform Commission jointly issued the “Textile Industry Quality Upgrading Implementation Plan (2023-2025)”, which provides important instructions to improve China's textile industry's ability to innovate independently, eliminate backward production capacity, and optimize the industrial layout. The textile industry will usher in an accelerated transformation. According to data from the China Textile Industry Federation, the textile industry composite sentiment index for the four quarters of 2023 was 55.6% and 57, respectively.
0%, 55.9%, and 57.2% rebounded to higher levels in recent years, up 13.0%, 10.7%, 11.6%, and 10.2%, respectively, from the same period last year. The gross margin of the company's textile carding equipment business is as high as 44.45%, and as the only listed company in the domestic textile carding equipment field, the company has a perfect industrial chain layout, comparable to international advanced technology, and rapid product iteration, which is expected to fully benefit from the continued recovery of the textile industry.
(2) Stainless steel decorative panels: The company's stainless steel decorative panel business accounts for 70.03% of total revenue in 2023. Downstream customers are mainly concentrated in the fields of elevators and home appliances (including kitchen appliances). In the elevator sector, the company has established stable cooperative relationships with many high-quality enterprises at home and abroad, such as Otis Elevator, Shanghai Mitsubishi Elevator, Haier Home Appliance, and Fisher Packer, which is conducive to steady and continuous business growth; in the field of home appliances (including kitchen appliances), looking forward to 2024, the implementation of the national “double carbon” policy and the effects of a new round of “trade-in” policies are worth looking forward to. It is expected that the proportion of stainless steel used in high-end household appliances, kitchenware and other products will gradually increase in the future, and the company's large-scale advantages will be further highlighted.
(3) Special steel wire+equipment manufacturing: The company has obtained 18 utility model patents in the field of special steel wire, independently developed high-end needle cloth steel wire and high-end fishhook steel wire, successfully entered the field of high-tech and high-value-added products, and promoted the IATF 16949 automobile quality management system, independently developed and produced small-specification spring steel wire for high-carbon high-strength automobile oil seals, changing the situation where domestic spring steel wire for oil seals is dependent on imports; the company's equipment manufacturing business currently mainly serves the new energy vehicle industry, which is in a rapidly developing stage, and has launched a special high-speed high-precision high-precision new energy industry Intelligent rolling production line, equipment performance indicators have reached or are close to imported levels. The company continues to show its competitive advantage in the two extended industries. It is expected to open up overseas markets in the future and strive to increase the share of sales in overseas markets.
Maintaining the “increase in holdings” rating. The impact of Yuantong Stainless Steel's asset injection on the company's performance is estimated to be 146/174/204 million yuan in 2024-2026, and the corresponding valuation is 18/15/13 times. Maintain an “Overweight” rating.
Risk warning: risk of macroeconomic fluctuations, risk of fluctuations in raw material prices, risk of impairment of assets such as goodwill, human resources risk, risk of industry calculation bias.