Revenue is growing steadily, and we are optimistic about the company's medium- to long-term development potential
In '23, the company's revenue was 2.86 billion yuan, +0.4% year on year, with net profit of 160 to 148 million, +8% and 15.5% year over year; 23Q4 revenue was 740 million yuan, -4.2% year on year, and 0.07 billion to mother and 0.04 billion in non-net profit, turning a loss into a profit. 24Q1 revenue was $640 million, +0.4% year over year, and net profit attributable to mother and net profit of $52 or 50 million, +8.7% year-on-year.
Anticorrosive pipes and PVC pipes continue to be released. The gross margin of 24Q1 is under pressure. The revenue of PE/steel wire/anticorrosive/insulation/PVC pipe fittings in 23 years was 3.5, 3.9, 12.9, 1.6, and 110 million yuan, respectively, -24%, and 110 million yuan, year-on-year, -24%, +20%; average prices were -10%, -6%, -16%, -19%, and +3%; the sales volume of the five types of products was 3.2, 2.9, 20.5, 2.4, and 12,000 tons, respectively. 10.1%, +48.8%, -34.4%, and +17.0%; gross margins were 23.4%, 31.2%, 21.7%, 17.1%, and 20.5%, respectively, -4.3, +1, +3.1, -2.3, +1.8pct; the comprehensive gross margin for 23 years was 19.4%, +0.04pct year over year, mainly due to anti-corrosion pipelines, which led to an increase in overall gross margin. The 24Q1 gross margin was 15.8%, down 4.6pct year over year. The company is actively promoting the “high-performance composite pipeline capacity expansion project with an annual output of 74,000 tons”, which is expected to further expand the production capacity of high-performance composite pipelines; it continues to increase the “automotive+rail+water transportation” multimodal transportation, which guarantees the delivery of various major projects such as the Xiaogan Water Supply Source Water Transfer Project, Hanjiwei, Zaozhuang Liangku and Sihe, and Boxing Power Plant.
Expense rates have risen slightly, and cash flow has improved markedly
The expense ratio for the 23-year period was 10.78%, +1.18pct year on year; sales, management, R&D, and finance expense ratios were +1.02, +0.41, +0.1, and -0.36 pct year on year; asset and credit impairment losses were 64 million yuan, a year-on-year decrease of 0.3 million, and other income increased by 0.08 million yuan year on year. Under the combined influence, 23FY net interest rate increased 0.58 pct to 5.82% year over year. The net amount of CFO in '23 was 190 million, with a year-on-year increase of 174 million inflows. Payments are now +11.4pct and -8.1 pct year-on-year, accounts receivable decreased by 250 million yuan year-on-year, and cash flow improved markedly.
I am optimistic about the expansion of demand brought about by water conservancy investment. Maintain the “purchase” rating. According to the Centennial Data Network, the funding situation for water conservancy projects this year is relatively good, and the progress of water conservancy projects arranged to increase the issuance of treasury bonds is accelerating month by month. Recently, Guangdong and other regions have entered the rainy season, and renovation projects for flood-prone sites have gradually begun in '24. We expect that physical quantities will be generated one after another. We believe that investment in water conservancy continues to increase structural support for infrastructure, and pipeline companies are expected to benefit first. However, considering the large fluctuation in raw material prices and the risk of accounts receivable, we adjusted the company's net profit from 24-26 to 2.3, 2.7, and 310 million yuan (the previous value was 290 million yuan and 340 million yuan in 24 and 25 years), corresponding to 11.9, 10.1, and 8.7 times PE for 24-26 years. Considering that comparable companies had an average PE of 15 times in 24 years, the corresponding target price was 13.40 yuan, maintaining the “buy” rating.
Risk warning: Prices of raw materials have risen sharply, downstream demand falls short of expectations, capacity release falls short of expectations, risk of bad debts, and increased industry competition.