Yearly revenue/net profit to mother +2.3%/-74.8% YoY, maintaining the “gain” rating

Zaisheng Technology released its annual report. In 2023, it achieved revenue of 1,656 billion yuan (yoy +2.30%, after deducting Youyuan Environmental revenue of +8.77%), net profit of 38.13 million yuan (yoy -74.76%, previous value restated), and deducted non-net profit of 19.23 million yuan (yoy -84.83%). Among them, Q4 achieved revenue of 390 million yuan (yoy -7.13%, qoq -11.92%) and net profit to mother of 79.14 million yuan (yoy-86 million yuan, qoq - 115 million yuan). Taking into account the decline in consolidated revenue/profit due to the company's 23 years' sale of its subsidiaries, we adjusted the company's 24-26 EPS to 0.10/0.13/0.17 yuan, respectively (previous value 0.25/0.30 yuan for 24-25 years). Comparatively, the company's 24-year Wind unanimously expected an average PEG value of 0.66 times. Considering that there is still some uncertainty about the company's transformation, the short-term revenue growth rate declined, and the company was given 0.56 times PEG in 24 years, with a target price of 3.47 yuan (previous value of 6.12 yuan), maintaining the “gain” rating.

The sale of the subsidiary's short-term disrupted revenue. Product restructuring affected the gross margin level of the company's clean air business and energy efficiency business respectively achieved revenue of 9.80/650 million yuan, -3.64%/+13.34% year-on-year, and the clean air equipment business achieved revenue of 416 million yuan, -2.76% year-on-year, mainly due to the sale of the subsidiary's long environment, but through vigorous expansion of application areas, the business achieved good revenue. Purification equipment and filters achieved a total revenue of 490 million yuan, +9.2% year over year. The gross profit margin for 23 years was 21.92%, -3.87pct. Among them, the gross margin of the clean air/energy efficiency business was 26.40%/15.02%, -0.89/-7.95pct year on year. The decline in gross margin was mainly due to the effects of falling product unit prices and insufficient release of production capacity for new construction projects. The combined revenue structure changed, and the share of revenue from high-value-added products decreased. 23Q4 gross profit margin 12.75%, -8.48/-13.18pct month-on-month.

The rate for the period decreased slightly year-on-year; the debt ratio improved relatively well

The cost rate for the 23-year period was 16.79%, of which sales/management/R&D/finance ratio was 3.28%/6.76%/5.52%/1.23%, and -0.26pct/-0.47pct/-1.10pct/1.11pct year-on-year.

Net profit margin for 23 was 2.30%, -7.03pct year over year; 23Q4 was -20.3%, -21.9/-28.4pct YoY. At the end of 23, the company's balance ratio/interest-bearing debt ratio was 26.8%/14.7%, -7.7/-5.0 pct year-on-year. Net cash flow from operations in '23 was $0.2 billion, -99.37% year-on-year, mainly due to an increase in the share of bill settlement in recovery payments, and notes have not yet expired or been discounted.

The 24Q1 revenue/net profit ratio was -9.9%/-2.7%, making every effort to promote the intelligent transformation of automation for 24 years. The company set up a separate AI smart department to fully promote the intelligent transformation of production system automation, further improve the level of refined management, and reduce overall operating costs. According to the company's quarterly report, 24Q1 revenue/net profit to mother was 340 million yuan/0.3 billion yuan, -9.9%/-2.7%, excluding long-term environmental sales effects, revenue +15.1% year over year, net profit to mother +6.5% year on year; 24Q1 gross profit margin 21.2%, -1.7 pct year on year; period expense ratio 14.6%, +1.2 pct year on year, net profit margin to mother 9.5%, +0.7 pct year on year; net operating cash flow was 0.3 billion yuan, +0.26 billion yuan year on year.

Risk warning: The cost of raw materials has increased dramatically, the exchange rate fluctuates greatly, and the risk of bad debts.