Event: The company released its annual report for 2023 and the first quarter of 2024. In 2023, we achieved operating income of 74.839 billion yuan, an increase of 25.81% year on year, and realized net profit to mother of 2,957 billion yuan, an increase of 1614.73% year on year. 23Q4 achieved operating income of 25.185 billion yuan, an increase of 20.13% over the previous year, and achieved net profit of 396 million yuan to mother. 24Q1 achieved operating income of 15.270 billion yuan, a year-on-year increase of 68.84%; realized net profit to mother of 401 million yuan, an increase of 821.12% over the previous year.
The production side and operation side of the civil ship construction business showed a good trend: the company completed the delivery of 81 civil ships/7,534,900 dwt throughout 2023, and the tonnage completed 122.80% of the annual plan, an increase of 7.55% over the previous year.
The company received a total of 128 civil ship orders in 2023, 9.1861 million DWT/72,888 billion yuan (according to the exchange rate at the end of 2023, same below). By the end of 2023, the company had ordered a total of 261 ships/19.437,800 dwt/153.499 billion yuan for commercial vessels.
Increased gross margin of the shipbuilding and offshore engineering business: The gross profit margin of the company's shipbuilding and offshore engineering business was 10.13% in 2023, an increase of 3.90 PCT over the previous year, due to the increase in the number of ships delivered by the company and the average price of a single ship during the year. The subsidiary Waigaoqiao Shipbuilding recovered the final payment of the contract for the 4 offshore platforms and confirmed revenue of 5.927 billion yuan, and confirmed gross profit of 2,659 billion yuan. After deducting the influence of the 4 offshore platform factors, the gross profit margin of the ship repair and marine engineering business was 6.94%, an increase of 0.71 PCT over the previous year.
The cost ratio was optimized, and the cash flow increased significantly: in 2023, the company's sales, management, R&D, and finance expenses totaled 5.596 billion yuan, a year-on-year decrease of 2.10%; the four-item cost ratio was 7.48%, down 2.06 PCT from the previous year. Among them, sales expenses increased by 415 million yuan, an increase of 161.23% over the previous year, mainly due to the large amount of sales service fees charged for the completion and delivery of the first large-scale domestic cruise ship. The year-on-year decline in management expenses was mainly due to the loss of work stoppages and the large amount of special expenses in the previous year. Net cash flow from operating activities was 18.213 billion yuan, an increase of 18.250 billion yuan over the previous year, mainly due to ① the year-on-year increase in the number of ships completed and delivered and the number of new orders received during the year, while at the same time, the amount of cash received from recovering offshore platforms, selling goods, and providing services increased by 29.846 billion yuan; ② the company rapidly increased production by hand-held orders, increased investment in large-scale products under construction, and increased cash from purchasing goods and receiving labor payments increased by 11.21 billion yuan year on year.
Profit forecasting, valuation and rating: Benefiting from the continuous increase in global new ship costs in recent years, the gross margin of the company's shipbuilding business has shown an upward trend. We forecast that the company's net profit for 2024-2026 will be 50.58,7287/9.743 billion yuan. The PE corresponding to the current stock price is 33/23/17X, respectively. China is transforming from a shipbuilding power to a shipbuilding powerhouse. As a leader in advanced shipbuilding, the company actively promotes energy saving and environmental protection and high-end ship models, and occupies a leading position domestically and globally. Maintain a “buy” rating.
Risk warning: risk of reduced demand in civil shipping business; risk of market competition; risk of fluctuations in prices of major raw materials; risk of exchange rate fluctuations; risk of business management; risk of production safety.