The 24Q1 revenue/net profit ratio of -11.8%/-38.8%, maintaining the “purchase” rating company achieved revenue/net profit of 44.3/2.0/ 0.9 billion yuan, or -11.8%/+1.1%/-38.8% year-on-year. We believe that Q1 production and sales rates were mainly affected by factors such as slow implementation of physical volume and rain and snow in East China. Meanwhile, intelligence continued to advance, and the increase in R&D expenditure dragged down profit growth more year-on-year. We maintained the company's 24-26 net profit forecast of 13.3/14.7/1.6 billion yuan, comparable to the company's 24-year average wind forecast of 12xPE, and approved the company's 24-year 12xPE target price of 23.18 yuan (previous value 19.32 yuan), maintaining the “buy” rating.
Gross margin increased year-on-year, and a significant increase in R&D put short-term pressure on 24Q1. The 24Q1 company signed new contracts totaling about 6.965 billion yuan, or -3.3% over the same period last year, all of which were material orders. The output of 24Q1 steel structure products was about 917,900 tons, +0.1% year-on-year. The gross margin of the 24Q1 company was 10.6%, +1.3 pct year over year and -0.3 pct month over month, indicating that the cost side was affected by the continued decline in steel prices.
We estimate that the net profit of 23Q1/Q2/Q3/Q4/24Q1 steel structure products was 156/258/221/139/95 yuan/ton (calculated as an overall deduction without return), and 24Q1 was -39.1% year-on-year, mainly due to a significant increase in R&D expenses. The 24Q1 company's R&D expenses were 160 million yuan, +105.4% year-on-year, affecting net profit of 170 yuan/ton over the previous year.
Expense rates and government subsidies increased during the 24Q1 period, and net interest rates after deducting non-return from mother fell 7.2% year-on-year to +2.54pct year-on-year. Among them, the sales/management/R&D/finance expenses ratio was 0.51%/1.44%/3.54%/1.70%, and +0.04/+0.12/+2.02/+0.36pct year-on-year, mainly due to a sharp increase in R&D investment, and the increase in various expenses was higher than the revenue growth rate. The 24Q1 government subsidy was 151 million yuan, an increase of 77 million yuan over the previous year. Under the comprehensive influence, the company's 24Q1 net interest rate of non-return mother deducted -0.87 pct year on year to 1.98%. 24Q1 net operating cash flow was 84 million yuan, -84 million yuan year on year, and receipt and payment ratios were 106.7%/96.3%, respectively, +6.9/+10.3 pct year on year.
Large-scale procurement consolidates cost advantages, increases R&D and promotes intelligent transformation to ensure core competitiveness companies have signed strategic cooperation agreements with Baosteel, Ma Steel, Shagang, etc. to consolidate procurement cost advantages. Since the establishment of a special intelligent manufacturing R&D team in 2021, it has developed or introduced advanced intelligent equipment in various fields, including fully automatic delivery, laser cutting, intelligent welding, and automatic spraying. Further breakthroughs were achieved in 2023, and a “lightweight arc welding robot intelligent welding system” was developed, and the information management platform was seamlessly connected with laser intelligent cutting equipment. Product quality was improved first, and the foundation for cost reduction was created in the long term.
Risk warning: risk of fluctuations in raw steel prices; risk of market competition; risk of labor shortage.