Incident: The company released its 2023 annual report & 2024 quarterly report on April 25, achieving revenue of 10.01 billion yuan, YoY -30.2%; net profit to mother of 850 million yuan, YoY +3.4%; deducted non-net profit of 820 million yuan, YoY +3.7%. 1Q24 achieved revenue of 2.28 billion yuan, YoY -11.9%, net profit to mother of 168 million yuan, YoY -21.5%, deducted non-net profit of 165 million yuan, YoY -22.9%. The performance was in line with market expectations. The company's special orders declined in 2023, while the delivery of foreign trade products was affected by foreign supervision and manufacturing progress, causing the revenue side to decline in '23. Our comprehensive review is as follows:
Profitability increased by reducing costs and increasing efficiency in '23, and profits maintained positive growth under revenue pressure. 1) Looking at a single quarter: 4Q23 achieved revenue of 2.17 billion yuan, YoY -42.8%; net profit to mother of 260 million yuan, YoY +16.1%; net profit after deducting non-return to mother of 240 million yuan, YoY +10.1%. 2) Profitability: 4Q23 gross margin increased 11.2ppt to 26.1% year over year; net margin increased 5.7ppt to 11.7% year over year. Gross margin increased 4.7ppt to 16.1% yoy in 2023; net margin increased 2.7ppt to 8.4% yoy. The company's cost reduction and efficiency increased profitability in '23. Net profit to mother maintained positive growth throughout the year against the backdrop of a 30% decline on the revenue side.
1Q24 gross margin increased 1.0ppt to 13.5% year over year, and net margin decreased by 0.9ppt to 7.3% year over year.
The decline in special orders and delays in foreign trade delivery have put a phased pressure on revenue. Looking back at 2021 and 2022, the completion rate of the company's business plan exceeded 103% for two consecutive years; the decline in special orders in 2023 was compounded by delays in delivery of foreign trade products. The company's main business achieved revenue of 9.81 billion yuan in 23 years, and the completion of the business plan was only 68.2% (the main business revenue of the 23-year business plan was 14.38 billion yuan). Multiple factors have put a phased pressure on the company's revenue. The company's business plan for 2024 is expected to generate 10 billion yuan in main business revenue.
Expenses were optimized during the period of cost reduction and efficiency; cash flow from operating activities improved. In 2023, the company actively promoted cost reduction to 870 million yuan. Due to declining revenue, the cost rate increased 2.0ppt to 8.7% year over year, of which: 1) R&D expenses decreased 11.0% to 510 million yuan year on year, mainly by optimizing R&D processes and strengthening budget control to improve R&D efficiency; R&D expenses increased 1.1ppt to 5.1% year over year; 2) management expenses decreased 7.5% to 410 million yuan year on year, mainly by carrying out in-depth cost reduction and efficiency; strict control of management expenses; management expenses ratio The year-on-year increase was 1.0ppt to 4.1%. 3) Sales expenses increased 78.7% year over year to 45 million yuan. Mainly, Beichuang increased communication with foreign customers this year, which led to an increase in international travel expenses and sales and service expenses. As of the end of 1Q24, 1) inventory was 2.90 billion yuan, a decrease of 16.5% from the beginning of '24; 2) Contract liabilities were 3.62 billion yuan, a decrease of 36.5% from the beginning of '24. Net cash flow from operating activities in 2023 was $940 million, compared to $440 billion in 2022. The improvement in net cash flow from operating activities in '23 was mainly due to the extension of settlement in '22 to '23, while the amount of notes payable in '23 decreased compared to '22.
Investment advice: The company is the only listed company in China that develops and manufactures special ground equipment, benefiting from the national equipment mechanization, informatization and intelligent integration development strategy. We expect the company's net profit from 2024 to 2026 to be 920 million yuan, 1.02 billion yuan, and 1.07 billion yuan, respectively, with a corresponding PE of 15x/13x/13x.
Maintain a “Recommended” rating.
Risk warning: Downstream demand falls short of expectations; overseas business progress falls short of expectations, etc.