Event: The company released its annual report for 2023 and the report for the first quarter of 2024.
In 2023, the loss turned into a profit, and the company's operations improved marginally. In 2023, the company achieved revenue of 5.556 billion yuan, up 6.58% year on year; realized net profit of 96 million yuan, up 137.55% year on year; net profit after deducting 55 million yuan, up 120.32% year on year. Overall, the company got out of trouble in 2023, turning a loss into a profit, and the pressure on the cost side improved marginally. On a quarterly basis, net profit for Q1-Q4 in 2023 was 0.34/0.44/0.28/ -0.10 billion yuan, respectively, up 143.64%/179.68%/177.43%/89.00% year-on-year, respectively. The operating conditions improved year-on-year.
Cost-side pressure was reduced, and gross margin was significantly restored. In 2023, due to a decrease in raw material wire and energy purchase unit prices, the pressure on the company's cost side was reduced, and gross margin was released. The company's gross margin for the full year of 2023 was 8.25%, up 6.17pct year-on-year, and profitability improved markedly. On the cost side, the company's expense ratio for the 2023 period was 7.17%, down 0.18pct year on year. Among them, the sales expense ratio, management expense ratio, financial expense ratio, and R&D expense ratio were 1.34%/1.67%/2.66%/1.49%, respectively, and -0.09pct/-0.07pct/+0.21pct/-0.23pct, respectively. Apart from the financial cost rate, all other expense rates declined.
2024Q1 continued to be profitable, and net profit was corrected after deduction. The company achieved revenue of 1,239 billion yuan in 2024Q1, a slight decrease of 2.12% over the previous year; realized net profit of 7.022 million yuan, a year-on-year decrease of 79.05%; net profit after deduction was 3.414,700 yuan, an increase of 177.50% over the previous year. The decline in the company's profit in 2024Q1 was mainly due to the decline in project revenue compared to the same period last year. Judging from the deduction, the company's profit was still growing, and profits were achieved.
Gather the main business, reduce costs with green energy, and simultaneously develop special steel wire. In 2023, the company added 2 new bezel steel wire production lines, increasing production capacity by 50,000 tons; the third phase of the intelligent transformation of steel cord in the Zhucheng factory area was completed and put into operation; the first steel cord factory in the Kenli factory area was successfully relocated and put into use, and construction of the second phase has also started. It is expected to be completed and put into use in October 2024; the production capacity of cable bezel steel wire continued to increase, reaching 880,000, an increase of more than 30% over the same period last year. In line with the continued progress of the company's green energy construction, we believe that the company is expected to continue to improve its profit level in the future.
Profit forecasting and investment advice. Since the company's 2024Q1 profit side is still under pressure, we lowered the company's profit forecast. We expect the company's revenue for 2024-2026 to be 63.95/75.81/8.808 billion yuan, respectively, and net profit to mother of 1.52/298/340 million yuan, respectively. The current market value corresponds to 2024 PE of 20.6X.
The company's downstream growth is picking up steadily, and cost optimization in the main business has clearly boosted profits. New superimposed special steel wire products are expected to break through new tracks such as robots and maintain a “buy” rating.
Risk warning: risk of a sharp rise in raw material prices; risk of macroeconomic downturn; risk of green energy projects and new products falling short of expectations.