The company released its annual report for '23 and its quarterly report for '24, and the results both exceeded expectations. With the release of autonomous and controlled demand for thermal power DCS, the company is in the first tier of the industry and is expected to enjoy the dividends of the thermal power cycle. The company's profitability continued to improve during the reporting period, and is expected to maintain a high growth trend throughout the year 24, maintaining a “Highly Recommended” investment rating.
The company released its 2023 annual report, and the performance exceeded the forecast limit. The company achieved operating income of 1,407 billion yuan, YoY +21.90%. After excluding revenue factors in the smart energy business sector in '22, the company's industrial automation, informatization and intelligence business actually grew by 32.85%; achieved net profit of 161 million yuan to mother, turned loss into profit; realized net profit withheld from mother of 115 million yuan; achieved net operating cash flow of 172 million yuan, YoY +81.32%. Among them, 23Q4 achieved operating income of 407 million yuan, YoY +59.81%; realized net profit of 70 million yuan, YoY +114.18%; realized net profit without deduction of 39 million yuan, YoY +107.76%. Furthermore, the impact of matters involving unqualified opinions on the company's 2022 and 2021 audit reports has been removed.
Net profit increased significantly in 24Q1. 24Q1 achieved operating income of 367 million yuan, YoY +30.08%; realized net profit of 43 million yuan, YoY +322.18%; realized net profit without deduction of 0.38 million yuan, YoY +363.02%; realized net operating cash flow of -74 million yuan, YoY -100.40%. The sharp increase in net profit is mainly due to the company's 24Q1 revenue growth, increased gross margin, and year-on-year decline in expenses. Benefiting from the boom in the thermal power industry, we judge that the company is expected to maintain a high growth trend in 24 years.
Profitability continues to increase. The company strengthened its talent pool and further improved human efficiency. In '23, the company's overall gross profit margin was 39.21%, up 7.69 percentage points year on year, and single Q4 gross profit margin was 44.31%, up 20.29 percentage points year on year; during the reporting period, the company's per capita income was 755 million yuan, up 16.83% year on year, and profit per capita was 85,700 yuan. In '23, the company's sales, management and R&D expenses rates were 14.44%/6.57%/10.22%, respectively, with year-on-year changes of -2.58/0.08/0.09 percentage points, respectively, and remained relatively stable.
The company's autonomous and controllable DCS ranks among the highest in the industry in domestic large-scale unit control systems such as millions of units and 9H combustion engines. The company pioneered the launch of the NT6000 V5 intelligent control system in the country in 2020. It is the first domestic DCS system certified by a national authority in China. During the reporting period, the company won dozens of large-scale thermal power generators, including Zhejiang Energy Liuheng, Guoxin Binhai, Guangdong Electric Power Dapu, Yunneng Tuhonghe, Zaomine Hongdunjie, Panjiang Puding, Hubei Energy Ezhou, as well as 9H combustion engine projects such as Shenzhen Energy East Power Plant and Mawan Power Plant. We believe that this year and next two will be the peak period for new thermal power construction in China, and demand for autonomous and controllable DCS replacement of superimposed coal-fired power units is strong. As a leading domestic thermal power DCS enterprise, the company is expected to share the dividends of this round of thermal power construction cycle.
Maintain a “Highly Recommended” investment rating. The company's revenue for 2024 to 2026 is estimated to be 19.01 billion yuan, 25.32 billion yuan, and 3.180 million yuan, respectively, and net profit to mother of 251, 3.08, and 362 million yuan, corresponding PE is 14.6, 11.9, and 10.1 times, respectively, maintaining a “highly recommended” investment rating.
Risk warning: The scale of thermal power investment and construction is lower than expected, and competition in the industry is intensifying.