Core views
In the first quarter of 2024, the company achieved operating income of 4.43 billion yuan, a year-on-year decrease of 11.8%, and achieved net profit of 200 million yuan, a year-on-year increase of 1.1%. The decline in steel prices led to a year-on-year decline in revenue, an increase of 80 million yuan in R&D investment, and a year-on-year increase of 80 million yuan in government subsidies, maintaining a positive increase in net profit to mother. The new signing remained stable. Excluding steel price factors, order processing volume increased 2.6% year-on-year in the first quarter. As the company's intelligent transformation deepens, we are optimistic that the company will reduce costs and increase efficiency in the medium to long term.
occurrences
The company released its 2024 quarterly report, achieving operating income of 4.43 billion yuan, a year-on-year decrease of 11.8%, and a net profit of 200 million yuan to mother, an increase of 1.1% over the previous year.
Brief review
Steady growth in performance. The company achieved revenue of 4.43 billion yuan in the first quarter of 2024, a year-on-year decrease of 11.8%, and net profit to mother of 200 million yuan, an increase of 1.1% year-on-year. The main reasons for the differentiation in revenue and profit growth are 1) the decline in revenue is mainly due to the decline in steel prices. The average price of medium and heavy plate in the first quarter of this year was about 4,066 yuan/ton, down 323 yuan/ton from the same period last year, while the processing volume of steel structures in the first quarter was 918,000 tons, the same as the same period last year. The gross profit per ton was 511 yuan/ton, up 4 yuan/ton; 2) R&D expenses in the first quarter suppressed the profit growth rate. R&D expenses in the first quarter increased by 88 yuan per ton compared to the same period last year, resulting in a net profit of only 95 yuan/ton per ton in the first quarter. A year-on-year decline of 61 yuan; 3 ) Net profit to the mother maintained a positive increase mainly due to the fact that the current government subsidy was 80 million yuan higher than in the first quarter of last year.
New orders have remained stable. The company signed a new order of 6.965 billion yuan in the first quarter, a year-on-year decrease of 3.3%. Excluding the steel price factor, assuming a tonne processing fee of 1,500 yuan, we estimate that the implied contract volume in the first quarter increased 2.6% year-on-year. The new order structure was optimized. The company's order structure is expected to continue to improve as the manufacturing boom increased in the first quarter to 2,068 billion yuan (projects with a processing capacity of 10,000 tons or more), an increase of 6.8 percentage points over the previous quarter. The average contract amount per ton was 5,777 yuan, an increase of 366 yuan over the previous quarter.
Intelligent transformation is advancing further towards integration. Since the second half of last year, the company has continued to increase R&D investment to promote intelligent production. In April of this year, the company tendered 2,000 robot rails, water-cooled welding guns, air-cooled welding guns, etc., and has purchased 800 welding robots and 1,500 robot welding power supplies to speed up the pace of independent integration of welding workstations. At present, production bases have used some Honglu lightweight intelligent welding robots and ground-mounted teaching-free intelligent welding workstations integrated with themselves. Intelligent transformation increases R&D investment in the short term and affects profits. In the medium to long term, it is beneficial to increase production capacity, reduce costs, and improve the company's profitability
Keep the purchase rating and target price unchanged. We forecast that in 2024-2026, the company's net profit will be 14.3/16.3/1.8 billion yuan, and the corresponding EPS will be 2.07/2.37/2.60 yuan, respectively, leaving the purchase rating and target price unchanged at 25.53 yuan.
Risk analysis
The main risks of the company's operations stem from large fluctuations in steel prices, economic recovery falling short of expectations, and the company's own production capacity expansion falling short of expectations:
1. Steel prices have a great impact on the company's downstream demand. Large fluctuations or excessive steel prices can cause customers to adopt a wait-and-see attitude, fewer new contracts, and fewer orders. If steel prices rise too fast, it may cause downward pressure on the company's net profit after deducting tons; the company charges in the form of steel price+processing fee, and changes in steel prices may have a big impact on the company's gross margin. Assuming that steel prices rise by 5%/10%, respectively, gross margin will drop to 11.8%/11.3% in 2024, respectively, and production and sales will also be affected.
2. The company's downstream demand is mainly composed of manufacturing, infrastructure and real estate-related industries. The slowdown in fixed investment in the manufacturing industry, the formation of physical infrastructure workload falling short of expectations, and the recovery of real estate sales will all suppress the company's demand for products; 3. In terms of its own operation, the decline in the utilization rate of the company's existing production capacity and the failure to put into operation of the intelligent manufacturing base will also have a negative impact on medium- to long-term development; 4. The company disclosed a timely and indicative announcement 5 trading days before the expected share conversion price correction. The Shenzhen Stock Exchange issued a regulatory letter for the company on March 14. Keep an eye on the company Disclosure of information and changes in convertible bond prices.