Key points of investment:
Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company's revenue was 6.249 billion yuan, yoy +9.98%, net profit to mother was 1,008 billion yuan, yoy +20.89%. In 2024, Q1 revenue was about 1,507 million yuan, yoy +2.66%; net profit to mother was about 229 million yuan, yoy +6.7%; performance was in line with expectations.
The decline in raw material prices has driven up the gross margin of accessories, and the company's profit growth rate is higher than the revenue growth rate. The company's overall gross margin increased by 1 percentage point to 32% in 2023. Among them, the gross margin of parts sales increased by 10 percentage points to 48% year-on-year, mainly due to the low overall price of major raw materials such as polypropylene and steel this year, which led to a significant increase in the company's net profit.
Vehicle revenue increased 3% in 2023, with new energy revenue accounting for 25% and profit accounting for 20%. The downstream distribution of the company's complete machinery in 2023 is: minerals and processing (27%), environmental protection (26%), new energy (25%), chemicals (10%), gravel (6%), biomedicine (5%), and new materials (2%). Among them, environmental protection, mining, etc. remained stable, demand in the new energy and new materials industries remained high, and chemicals, gravel, etc. declined slightly. Overall, the company's overall machine growth rate slowed in 2023, with a 3% year-on-year increase. According to the company's gross profit share of total machinery in 2023, new energy accounts for about 20% of profit.
Contract liabilities are rising steadily, and future growth is guaranteed. By the end of 2023, the company's contract debt was 2,576 billion yuan. As of 2024Q1, the contract debt was 2,598 billion yuan (2023Q1 was 2,005 billion yuan), which is an overall steady increase.
The production capacity of supporting equipment was gradually implemented, and revenue of 420 million yuan was achieved in 2023, and the future potential is huge. As of 2023, the first phase of the company's complete filtration equipment has been partially put into operation, and the second phase has already competed for land use rights for the project. According to the company's announcement, it is expected to increase profits by 400 million yuan after the first phase and phase II are put into operation.
Overseas efforts continued. The company's export revenue in 2023 was 318 million yuan, yoy +17%, while gross margin increased 6 percentage points to 55%. The company clearly strengthens its sales and after-sales service network to further increase the scale of overseas revenue.
2023Q1 operating cash flow declined significantly, then steadily improved. At the same time, the 2023 dividend was 611 million yuan, with a dividend rate of 61%.
The company's net cash flow from operating activities in 2023 was 268 million yuan, yoy -73.79%, mainly due to a significant decline in 23Q1 (-0.3 billion yuan), followed by a steady improvement in the company's cash flow, which was +80 million yuan in 24Q1. Based on steady cash flow, the company continued to pay cash dividends of 4.80/2.86/3.30/5.77/611 million yuan in 2019-2023, with corresponding dividend rates of 116.21%, 55.56%, 50.93%, 69.15%, and 60.64%, with a cumulative cash dividend of 2,283 million yuan.
Investment analysis opinion: Maintain the company's 2024-25 net profit of 1,078/1,225 million yuan, and add the 2026 net profit forecast of 1,440 billion yuan, corresponding PE of 12/11/9 times, respectively, to maintain the “buy” rating.
Risk warning: The degree of decline in orders in the field of new energy and new materials exceeds expectations; orders in traditional fields such as environmental protection fall short of the expected risk; overseas business progress falls short of expected risk, and sales progress of supporting equipment falls short of expected risk.