23 年电力锻件超翻倍增长；产品结构变化导致整体毛利率下降。分产品看，2023 年：1）航空航天锻件实现营收11.3 亿元，YoY+13.3%，占总营收同比下降4.6ppt 至31.2%，毛利率同比减少1.2ppt 至43.8%；2）石化锻件实现营收9.3 亿元，YoY+20.7%，占总营收同比下降2.0ppt 至25.7%，毛利率同比减少2.5ppt 至15.8%；3）电力锻件实现营收8.6 亿元，YoY+115%，占总营收同比增长9.4ppt 至23.8%，毛利率同比增加9.3ppt 至15.4%。4）其他锻件实现营收2.7 亿元，YoY+18.7%，占总营收7.6%，毛利率同比增加4.0ppt 至21.4%。Incident: The company released its 2023 annual report & 2024 quarterly report on April 29, achieving revenue of 3.62 billion yuan, YoY +30.1%; net profit to mother of 490 million yuan, YoY +1.3%; deducted non-net profit of 430 million yuan, YoY +0.5%. 1Q24 achieved revenue of 750 million yuan, YoY -20.6%, net profit to mother of 73 million yuan, YoY -49.4%, deducted non-net profit of 70 million yuan, YoY -47.3%. The performance was basically in line with market expectations.
The steady increase in revenue in '23 was mainly due to growth in the power and petrochemical forging business; the decline in 1Q24 was mainly due to a decrease in the volume of aviation and petrochemical forgings. Our comprehensive review is as follows:
Revenue increased steadily by 30% year over year in '23; reduction in aviation & petrochemical deliveries in 1Q24 affected performance. 1) Looking at a single quarter: 4Q23 achieved revenue of 820 million yuan, YoY +22.9%; net profit to mother of 69 million yuan, YoY -48.9%; deducted non-net profit of 65 million yuan, YoY -27.7%. In 1Q24, due to the decline in aviation and petrochemical forgings, revenue decreased 20.6% year over year to 750 million yuan, net profit to mother decreased by 49.4% year on year to 73 million yuan, and net profit after deducting non-net profit fell 47.3% year on year to 70 million yuan. 2) Profitability: Gross margin decreased by 1.5ppt to 23.9% yoy in 2023; net margin decreased by 3.9ppt to 13.6% yoy. 4Q23 gross margin decreased 5.1ppt to 18.5% yoy; net margin decreased 8.4ppt to 11.7% yoy. 1Q24 gross margin decreased 5.3ppt to 21.0% yoy, and net margin decreased 5.5ppt to 9.7% yoy.
Electric forgings have more than doubled in 23 years; changes in product structure have led to a decline in overall gross margin. By product, 2023:1) Aerospace forgings achieved revenue of 1.13 billion yuan, YoY +13.3%, accounting for a year-on-year decrease of 4.6ppt to 31.2% of total revenue, and a year-on-year decrease of 1.2ppt to 43.8%; 2) Petrochemical forgings achieved revenue of 9.3 billion yuan, YoY +20.7%, accounting for a 2.0ppt to 25.7% year-on-year decrease in gross margin; 3) Electric forgings achieved revenue of 860 million yuan, YoY +115% year-on-year increase in total revenue 9.4ppt to 23.8%, gross margin increased 9.3ppt to 15.4% year over year. 4) Other forgings achieved revenue of 270 million yuan, YoY +18.7%, accounting for 7.6% of total revenue, and gross margin increased 4.0ppt to 21.4% year-on-year.
The company's share of revenue from low gross margin electric forging products increased in '23, leading to a decline in overall gross margin.
Continue to increase investment in R&D; actively prepare production and stock to meet strong demand. The cost rate increased by 1.1 ppt to 8.5% year on year during 2023, including: 1) the company continued to increase investment in product research and development in the aerospace and new energy industry. R&D expenses increased by 43.2% to 180 million yuan year on year, and R&D expenses increased by 0.4ppt to 4.9% year on year; 2) the management fee rate increased by 0.5ppt to 2.4% year on year, mainly the increase in intermediary agency service fees and depreciation expenses. As of the end of 1Q24, 1) inventories increased 8.2% to 990 million yuan from the beginning of '24; 2) Projects under construction increased by 156.1% year-on-year to 320 million yuan compared to the beginning of '24, mainly because fund-raising projects continued to advance construction.
The company actively prepares production and supplies to meet strong demand in various fields.
Investment advice: The company is one of the leading segments of aerospace ring forging in China. Along with the promotion of fund-raising projects and the release of production capacity, the company will continue to benefit from the boom in various fields of aerospace and new energy during the “14th Five-Year Plan” period. We expect net profit from 2024 to 2026 to be 550 million, 720 million, and 940 million yuan, respectively, with a corresponding PE of 14x/11x/8x. Maintaining a “recommended” rating considering the long-term prosperity of the downstream sector and the company's leading position in the segment.
Risk warning: downstream demand falls short of expectations; product price reduction; fluctuation in raw material prices, etc.
