Event: The company released its report for the first quarter of 2024. The company achieved operating income of 1,03 billion yuan in the first quarter, a year-on-year decrease of 28.48%; net profit of 166 million yuan, a year-on-year decrease of 16.41%; and basic earnings per share of 0.18 yuan, a year-on-year decrease of 18.18%.
Profit increased slightly month-on-month, and net sales margin improved. The company achieved net profit attributable to mother of 166 million yuan in 2024Q1, a year-on-year decrease of 16.41% and a month-on-month increase of 3.11%, achieving net profit without return to mother of 123 million yuan, a year-on-year decrease of 25.08% and an increase of 3.36%; the company's 2023Q2-2024Q1 quarterly gross sales margins were 17.29%, 20.29%, 18.49%, and 16.27%, respectively. The quarterly net sales margin was 15.69%, 10.82%, 10.86%, and 13.31%, respectively. 2024Q1 Decreased, but net interest rates continued to improve.
Sales growth is accelerating, and overseas markets are expected to expand at an accelerated pace. Through PQF project capacity release and continuous technological upgrading, the company currently has a production capacity of 1 million tons of special special pipes. The company achieved sales of 788,000 tons of finished pipes in 2023, an increase of 11.8% over the previous year. The company's sales target in 2024 is 900,000 tons, up 14.2% year on year, and production growth is further accelerated; according to the announcement, the company plans to invest 8,500 tons in new energy and semiconductor specialty materials projects to promote the increase in the proportion of products with high added value and high technology content; the subsidiary Changzhou Changbao Jingte Steel Pipe Co., Ltd. plans to invest 50,000 tons in construction In the NEV precision tube project, the product variety structure was further optimized, and profitability may continue to improve. According to the company's announcement, in order to further expand overseas markets and deepen the internationalization strategy, the company plans to establish Changbao International Development Singapore Co., Ltd., a wholly-owned subsidiary in Singapore with its own capital of 2 million Singapore dollars. The company's overseas market expansion is expected to accelerate in the future.
Downstream prosperity improved, and demand continued to expand. According to the company's annual report, it is expected that the domestic oil well pipe market will be generally stable in 2024, and there may be more incremental market demand and development space in the development of unconventional oil and gas resources, which will benefit the company's demand for oil well pipes and ancillary products; in 2022, the National Development and Reform Commission proposed to start 165 million kilowatts of thermal power in the two years from 2022 to 2023. According to the national energy security policy for the restart of early coal and power projects, boiler tube market demand will continue to improve. The thermal power industry is expected to enter a boom phase in the future, and boiler tube products are expected to rise sharply in volume and price.
Investment advice. The company focuses on the manufacture of small to medium caliber special pipes. Production growth is combined with structural improvements. Continued improvement in downstream demand, exchange factors and cost reductions effectively support its profit release. We expect the company to achieve net profit of 890 million yuan, 940 million yuan, and 1.04 billion yuan respectively from 2024 to 2026, corresponding to PE of 6.4, 6.1, and 5.5 times, maintaining a “buy” rating.
Risk warning: Prices of upstream raw materials have risen sharply, downstream demand falls short of expectations, and there is uncertainty about increasing production in new production lines.