Incident: The company recently released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 1,096 million yuan, +12.98% year over year; net profit to mother was 246 million yuan, +14.64% year over year. In the first quarter of 2024, the company achieved operating income of 166 million yuan, +16.18% year-on-year; realized net profit of 41 million yuan, +142.57% year-on-year.
The company's new distribution network quota was released in the second half of 2023, driving revenue growth in the software and information technology business. Software and Information Technology In 2023, the company's software and information technology business achieved revenue of 553 million yuan, +7.13% year over year, and achieved a gross profit margin of 84.52%, or -0.59 pct year on year. The 2023 2022 distribution network quota was released and officially implemented on July 1. The company's distribution network engineering pricing channel D3 software fully launched the first round of sales, mainly in provinces and cities. In terms of new energy, the company continues to incubate new energy products, launch photovoltaic and wind power inventory software, continue to build a product matrix covering wind, light, nuclear, storage, etc., and use the company's mature sales channels to expand the market share of new energy products.
Revenue from the smart instrument business grew rapidly, and a rapid detection device for monoacetylene was successfully developed. In 2023, environmentally friendly intelligent instruments and operation and maintenance services/intelligent electric power instruments and operation and maintenance services achieved revenue of 433/107 million yuan respectively, +19.27%/+32.90%, respectively, and gross margins of 38.56%/45.94%, respectively, -1.64pct/+5.73pct, respectively. In terms of environmentally friendly intelligent instruments, as of the end of December 2023, the company had not executed orders of 433 million yuan. In 2023, the company won bids for projects such as the procurement of automatic surface water quality testing data in Ningbo (Phase II), reflecting the competitiveness and comprehensive service capabilities of the company independently developed environmentally friendly intelligent instruments. In terms of intelligent power instruments, in 2023, the company's next-generation oil chromatography intelligent online monitoring system and core technologies such as “digital dynamic headspace balance degassing” were fully recognized by the market. At the same time, the company successfully developed a single-acetylene three-channel rapid detection device with excellent performance evaluation by the Chinese Academy of Sciences as excellent +, and can directly enter the field application process.
Continue to increase research and development efforts to enhance the core competitiveness of enterprises. In 2023, the company invested 159 million yuan in R&D, accounting for 14.56% of revenue. The company spent more than 10% of R&D over many years, and the proportion of R&D personnel reached 39.08% by the end of 2023. In order to cope with future market competition and the company's sustainable development, at the end of 2021, the company strategically proposed the establishment of a next-generation product technology platform. The construction of the platform took two years, and was successfully tested and put into application during the reporting period. The fifth-generation product technology platform targets customized products and solutions. It has the ability to define user scenarios and hot-plug individual requirements to meet fast, high-quality, and personalized delivery requirements. The application of the fifth-generation product technology platform is expected to ensure the sustainable development and leading competitiveness of the company's products within the next 5-10 years.
Profit forecast: Maintaining the company's “buy” rating. We expect the company's revenue in 2024-2026 to be 1,240/13.81/1,513 billion yuan respectively, achieving net profit to mother of 344/3.99/464 million yuan, corresponding PE of 15.43x/13.29x/11.43x.
Risk warning: Changes in the macroeconomic situation at home and abroad have exceeded expectations, market competition has intensified, promotion of new oil chromatography falls short of expectations, profit forecasts and valuation models have fallen short of expectations