2023 results are in line with market expectations
The company announced its 2023 and 1Q24 results: in 2023, the company achieved revenue of 1,931 million yuan, +27.34% year over year; net profit to mother was 237 million yuan, corresponding to profit of 0.25 yuan per share, +58.71% year-on-year, in line with market expectations. 1Q24 achieved revenue of 449 million yuan, -8.14% year on year; net profit to mother of 68 million yuan, +15.3% year over year, corresponding to profit of 0.07 yuan per share, in line with market expectations.
Profitability continues to increase, and expense rates have risen slightly. In 2023, the company's gross margin was 30.59%, up 4.58ppt year on year; net margin was 12.25%, up 2.42ppt year on year, and the company's profitability remained stable. In 2023, the company's sales expense ratio was 4.29%, up 0.73ppt year on year; the management expense ratio was 6.79%, up 0.09ppt year on year; R&D expenses rate was 5.58%, up 0.43ppt year on year.
By business segment: 1) Mooring chain sales volume was 32,100 tons, up 4.58% year on year, achieving revenue of 559 million yuan, up 41.02% year on year, gross profit margin of 41.59%, up 7.46ppt year on year; 2) Sales volume of marine chains and accessories was 132,700 tons, up 23.62% year on year, achieving revenue of 1,352 billion yuan, up 23.00% year on year, gross margin of 25.52% year on year. The increase in the company's revenue and gross margin was mainly due to the continued expansion of market share and the increase in the prosperity of the offshore oil and gas engineering industry.
Development trends
The marine offshore business continues to be booming, and floating wind power emissions are expected. According to the opinion of the CICC Group, along with OPEC+'s extension of the additional production reduction plan until 2Q24 and Russia plans to cut production by an additional 400,000 b/day, tightening production is boosting shortage expectations and supporting higher oil prices. It is expected that the Brent oil price center may remain around 85 US dollars/barrel in 1H24, and is expected to move up to $90-95 per barrel on 2H24. We believe that the company's traditional main business is expected to fully benefit from high oil prices, and orders are currently full. We expect floating wind power to enter the GW era by 2025, which is expected to drive the development of anchor chain systems. As a global leader in anchor chain systems, the company has a first-mover advantage and is expected to fully benefit.
There is strong certainty that the mining chain business will grow. The company will develop a new mining chain business in 2023, and its products have already been used in the National Energy Group and Shan? Industrialization of coal? , Luanhua? , Jinneng Holdings,? Industry recognition is gradually increasing for medium to large scale projects such as East Energy Group. Considering that the company continues to develop new product markets, we believe that the mining chain business is expected to contribute new growth points to the company's revenue.
Profit forecasting and valuation
Considering the company's clear business development path, we kept the 2024 profit forecast of 307 million yuan unchanged, and introduced a profit forecast of 400 million yuan for 2025. The current stock price corresponds to a price-earnings ratio of 25.4 times/19.5 times the 2024/2025 price-earnings ratio. We maintain our outperforming industry rating, but considering the decline in the industry's valuation center, we lowered our target price by 15.2% to 10.60 yuan, which corresponds to 33.2 times the 2024 price-earnings ratio and 25.4 times the 2025 price-earnings ratio. There is 30.7% upside compared to the current stock price.
risks
The development of the mining chain market fell short of expectations; the prosperity of the marine engineering manufacturing industry fell short of expectations.