24Q1 net profit without return to mother was +226% year over year, maintaining the “increase in holdings” rating. In the first quarter of 2024, the company achieved total operating income of 8.445 billion yuan, +40.3% year over year; net profit to mother was 170 million yuan, +31.1% year over year; net profit after deducting non-return to mother was 94 million yuan, +225.98% year over year.
The company's 24Q1 project workload and delivery volume increased year-on-year, and profitability improved significantly. We expect the company's net profit to be 8.3/13.0/1.53 billion yuan in 2024-2026, with a year-on-year growth rate of 60.1%/56.1%/17.4%, corresponding to PE 23/15/13 times, respectively. Comparatively, the company's 24 wind unanimously expected an average PE value of 20 times. The company is a leading manufacturer in the HAECO and offshore industries, and its international competitiveness is outstanding. We gave the company 27 times PE in 24 years, corresponding to a target price of 4.32 yuan (previous value: 4.11 yuan), maintaining the “increase” rating.
After deducting non-return net interest rate +0.63pp, the period's expense ratio was well controlled to achieve a gross profit margin of 10.64%, -3.68pp in the first quarter of 2024; net interest rate to mother 2.01%, -0.14pp year on year; net interest rate without return to mother was 1.11%, +0.63pp year on year. In terms of the period expense ratio, the total cost rate for the first quarter was 7.89%, -3.49pp year on year. Among them, the sales expense ratio was 0.6%, -0.30pp; the management expense ratio was 2.3%, -1.25pp; the financial expense ratio was 2.2%, -0.96pp; and the R&D expense ratio was 2.8%, -0.98pp.
A leader in the heavy equipment manufacturing industry, outstanding international competitiveness
As a global leader in heavy equipment manufacturing, the company relies on CCCC Construction Group. Its products are sold to 107 countries and regions around the world, and its international competitiveness is outstanding. The company has multiple production bases and ports of entry into the sea in Shanghai and Jiangsu, and can transport large products all over the world with more than 200,000 to 100,000 ton carriers. At the same time, the company has many overseas branches around the world and has a service team of more than 1,000 highly qualified professionals, which can provide efficient solutions and perfect spare parts service support on site. Furthermore, through the IDAS intelligent data analysis platform established by Zhenhua Heavy Industries' huge stock market, the subsidiary Terminexus has built the first digital supply chain platform in the HAECO industry to quickly match spot resources in the company, user and supplier inventories.
The upgrading and transformation of the manufacturing industry has ushered in new opportunities. R&D and innovation lead the company's development to grasp the “high-end and intelligent” trend of the manufacturing industry, strengthen innovation incentives, and continuously launch new technologies, products and services leading the development of the industry. New products and technologies pioneered by the company, such as double 40-foot container shore bridges and bidirectional anti-rocking systems, have become a weather vane for global port aircraft development; the “Tiankun” dredger has achieved a breakthrough in the core technology of China's large-scale self-propelled winch dredgers, making the design and construction technology of China's dredgers at the forefront of the world. By the end of 2023, the company had applied for a total of 3,925 patents, 2169 valid patents, and 61 international authorizations. The company's ability to lead the industry in R&D and innovation has become the core competitiveness of HAECO, offshore, shipping and other businesses.
Risk warning: Offshore business recovery is falling short of expectations, interest rate and exchange rate risks, raw material supply risks.