Revenue/net profit to mother in '23 was +17.9%/+20.8%, maintaining that “buying” the company achieved revenue/net profit of RMB 12.5/290 million, +17.9%/+20.8% year over year, and net profit to mother basically met our expectations (RMB 30 billion); 24Q1 revenue/net profit to mother of RMB 31/80 million, +4.6%/+15.9% YoY, revenue growth slowed but profitability was steady. Considering the reduction in the number of contracts the company has in hand, we expect the company's net profit to be 3.3/40/480 million yuan in 24-26 years. Comparatively, the company's 24-year Wind unanimously expected the average PE value to be 21x. Considering that the company's order and revenue growth rate is slowing in the short term or relatively weak, the company was given 17xPE in 24, with a target price of 17.85 yuan to maintain a “purchase.”

Revenue from the new materials and recycling business reached a new high. The annual gross margin increased by 2.0pct23, and the company's new materials and synthetic materials/recycled materials and industrial AI integrated application solutions achieved revenue of 7.9/38/60 billion yuan respectively, +19.0%/+28.8%/-24.8%. New materials and recycling business revenue all reached record highs. The decline in industrial AI revenue was mainly due to the lengthening of the delivery cycle of intelligent solutions; gross margin was 41.3%/31.9%/62.7% year on year, respectively +6.9/-6.9/ +8.3pct. Fluctuations in gross margin are mainly due to changes in order structure. In '23, the company's overall gross profit margin was 39.7%, +2.0pct year over year, of which Q4 gross profit margin was 39.6%, or -2.6/-2.3 pct month-on-month.

The reduction in exchange losses led to a decrease in the financial expense ratio. The net operating cash flow in Q4 all improved the 23-year company period's expense ratio by 13.5%, and the year-on-year cost ratio was -1.2pct. Among them, the sales/management/R&D/finance expenses ratio was 1.4%/6.1%/5.7%/0.3%, +0.2/-0.3/-1.2pct. The significant decrease in the financial expense ratio was mainly due to a decrease in exchange losses. Net profit margin for 23 years was 23.2%, +0.6pct year over year, of which Q4 was 24.3%, +2.1/+1.2pct YoY. Net operating cash flow in '23 was 260 million yuan, or -48.2% year over year. Mainly, project repayments were mostly paid with bank notes, but Q4 net operating cash flow was 180 million yuan, +1.2/+0.2pct, all of which improved.

24Q1 profitability remains steady, and the regeneration business is expected to benefit from the 24Q1 revenue/net profit to mother of 31/80 million yuan, +4.6%/+15.9% year-on-year; gross margin/period expense ratio/net interest rate to mother is 37.5%/10.7%/25.5%, year-on-year, -0.7/+1.0/+2.5pct, and overall profitability remains stable. In 2012, the State Council issued a notice on the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”, which mentions the need to “promote a high level of recycling of resources.” The company has accumulated a large number of engineering examples of full-process processes and equipment technology with independent intellectual property rights in recycled materials such as recycled polyester and recycled polyamide and degradable materials industries, which is expected to help and benefit from the development of the recycling industry.

Risk warning: Recycled polyester/polyamide capacity expansion/industrial AI falls short of expectations, and order execution is slow.