Brief performance review
On April 25, 2024, the company released its annual report for the year 23 and the quarterly report for the year 24. It achieved operating income of 8.398 billion yuan, an increase of 8.33% over the previous year; realized net profit of 92 million yuan, an increase of 76.59% over the previous year (according to the data after the accounting policy change), and realized net profit without return to mother of 52 million yuan, an increase of 110.74% year on year. 1Q24 achieved operating income of 1,672 billion yuan, a year-on-year decrease of 13.45%; realized net profit of 0.25 million yuan, a year-on-year decrease of 1.7%, and realized net profit after deduction of 0.24 million yuan, an increase of 18.83% over the previous year.
Management analysis
The company's state-owned enterprise reform has achieved remarkable results, and the net interest rate has gradually increased: the company has responded positively to the call for reform of state-owned enterprises and continued to push forward reforms in all three systems of personnel, labor, and distribution. In 23 years, per capita income was 1,726,900 yuan, an increase of 11.77% over the previous year, and labor efficiency continued to improve. The company's 22/23/1Q24 net interest rate gradually increased by 0.87%/1.3%/1.85%, respectively, and profitability is expected to continue to improve in the future.
There was a high increase in new orders in '23, and export orders doubled year-on-year. In '23, the company signed a new order of 9.5 billion yuan, up 8.3% year on year. Its domestic market was 8.4 billion yuan, up 8% year on year; international market orders of 1.1 billion yuan doubled year on year. Among downstream customers, Sinopec, and CNOOC all achieved breakthroughs, with orders of 4.1 billion yuan in the Sinopec market, accounting for 43%; the CNPC market won the bid for a two-year high-value procurement framework of 400 million yuan for diamond drills, and orders of over 300 million yuan for drilling rigs over a three-year period; the CNOOC market won the bid for a large procurement framework of 200 million yuan for three years for screw drilling tools and 30,000 tons of high-frequency welded pipes over a three-year period.
Orders for hydrogen energy equipment increased dramatically, keeping pace with the growth of Sinopec: the company achieved orders of 63 million yuan for hydrogen energy equipment in '23, an increase of 209 percent over the previous year, and built 8 hydrogen stations in the hydrogenation market, with a cumulative hydrogenation capacity of more than 2,000 kg; achieved zero breakthroughs in PEM hydrogen production and alkaline water hydrogen production performance in the hydrogen production market; won the bid for high-displacement diaphragm hydrogen compressors in the hydrogen supply market, laying a solid foundation for later service for the expansion of 10,000 square hydrogen supply centers. According to the company's official WeChat account information, the company signed the “Comprehensive Cooperation Framework Agreement” and “PEM Electrolyzed Water Equipment Manufacturing Cooperation Agreement” with the Sinopec Petrochemical Research Institute in January 24. It is expected that cooperation with Sinopec and the research institutes within the Sinopec system will continue to be deepened in the future, achieve breakthroughs in technology development and industrialization implementation around Sinopec's needs, lead other enterprises in the field of hydrogen energy, and create a “second curve” for the growth of the company's new energy business.
Profit Forecasts, Valuations, and Ratings
The company is expected to achieve net profit of 147/2.45/348 million yuan in 24-26 respectively. For the previous PE41X/24X/17X, considering that the company's state-owned enterprise reforms are expected to drive high profit growth, the hydrogen energy business closely follows Sinopec's layout and has broad prospects for growth, maintaining a “buy” rating.
Risk warning
Oil companies' capital expenses fell short of expectations, hydrogen energy business development fell short of expectations, and state-owned enterprise reforms fell short of expectations.