Event: On April 22, 2024, the company released the 2023 Annual Report & 2024 Quarterly Report. In 2023, the company achieved total operating income of 255 million yuan, a year-on-year decrease of 44.9%; realized net profit of 35 million yuan, a year-on-year decrease of 71.5%; and realized net profit of 16 million yuan after deduction, a year-on-year decrease of 83.6%. In the first quarter of 2024, the company achieved total operating income of 0.23 million yuan, a year-on-year decrease of 55.26%; realized net profit to mother of -0.11 million yuan, a year-on-year decrease of 292.05%; and realized net profit after deduction of -0.14 billion yuan, a year-on-year decrease of 396.64%.
Delays in project delivery led to a decline in 2023 results. Due to few major project planning and acceptance points in 2023, the company's revenue and profit declined sharply; furthermore, due to the high base factor of Q1 in 2023, the revenue and profit side declined year-on-year in Q1 in 2024. The company still has encouraging results in its 2023 financial data:
① Profitability remains stable: The company's gross margin in 2023 was 47.84%, the same level as in 2022, and the overall gross margin level was not affected by the decline in revenue.
② Investment was not reduced due to declining revenue: In the context of declining revenue in 2023, the company actively developed the market while controlling expenses. In 2023, sales expenses increased 14.8% year on year; R&D expenses only fell slightly by 4.2% year on year.
The boom in the nuclear industry chain continues to rise, and capital expenditure is relatively strong. China will maintain a high number of approvals for 10 nuclear power units per year in 2022 and 2023. We believe that nuclear power is an important means of low-carbon power generation, and future construction is expected to stabilize as the “3060” dual-carbon target approaches. Corresponding to this, capital expenditure on the industrial side is quite strong. In March 2024, China Nuclear Power announced its 2024 investment plan, with a sharp year-on-year increase of about 52%; in the same month, Jiangsu Shentong Company, a key valve supplier for nuclear power, issued a fixed increase plan to expand nuclear power valve production capacity through a fixed increase method.
The nuclear industry chain is the cornerstone, and new businesses are being expanded simultaneously. In the nuclear field, the company's future processing sector is the cornerstone to expand the early stage of the industry. In the field of nuclear technology applications, we seize development opportunities in the domestic medical isotope field and provide nuclear services for products such as medical isotope preparation equipment and new high-precision irradiation-resistant robots. In the field of nuclear power, orders increased slightly throughout the year; in the field of nuclear power, the company added CGN supplier qualifications and has promoted related product development and cooperation. In the non-nuclear field, the company expanded the military special robot AGV business through the acquisition of Tianjin Jiazi and developed the military product business.
Maintain an “Overweight” rating. The company lays out the nuclear industry chain, benefiting from the intelligent trend of the nuclear power and nuclear fuel cycle industry, and the long-term improvement of the nuclear industry intelligent equipment market. However, due to fluctuations in the pace of project tendering and nuclear delivery, the company's performance is easily affected. We cut and forecast the company's net profit to mother for 2024-2026 to be 1.11 (previous value 2.01), 1.49 (previous value 2.49), and 210 million yuan, respectively, corresponding PE of 34.1, 25.3, and 18.0 times, respectively. The company is still one of the targets with the highest “nuclear content” in terms of revenue share in the secondary market. It has scarcity and performance flexibility, and maintains an “gain” rating.
Risk warning events: risk of policy changes; risk of high customer concentration; risk of performance fluctuations due to discontinuous order acquisition; risk of falling short of expectations in fund-raising projects; seasonal risk of performance; risk of untimely update of information used in research reports; risk of deviation in industry size measurement.