Incidents:
Recently, the company released its 2023 report. In 2023, the company achieved operating income of 13.309 billion yuan, +3.95% year on year; realized net profit of 1,216 billion yuan, +0.48% year on year; single 2024Q1 company achieved operating income of 3.305 billion yuan, about +0.51% year on year; net profit to mother of 204 million yuan, -26.15% year on year. The comments on this are as follows:
The overall gas price was under pressure, and the cost rate remained basically flat during the period. In 2023, the company's gross sales margin was about 22.91%, about -2.58pct year on year; the net sales margin was about 9.58%, -0.45pct year on year. The main reason may be due to factors such as the sharp drop in rare gas prices and the downturn in the liquid market. The company's cost ratio for the period was 11.58%, +0.32pct year on year. Of these, sales/management/R&D/finance expenses accounted for 1.41%/5.99%/3.40%/0.77% of operating income, mainly due to sales and finance expense ratios of +0.27pct and +0.15pct year over year. The company's overall cost control was good. In 2023, the company achieved net operating cash flow of 2,463 billion yuan, of which net operating cash flow of 1,845 billion yuan was achieved in Q4.
There are plenty of orders for equipment in hand, and the gas business continues to advance. In 2023, the company signed new equipment sales contracts of 6.47 billion yuan for the whole year, of which 908 million yuan was the foreign trade contract amount, accounting for 14.03%. Ethylene cold boxes, liquid nitrogen washing cold boxes, and alkane dehydrogenation units continued to occupy a leading position in the domestic market.
The company signed a number of new gas investment projects throughout the year, including Shandong Hangzhou Oxygen, Henan Jinkai, and Shanxi Tianze, etc., with an oxygen production capacity of 450,000 Nm3/h (nitrogen-containing projects). By the end of 23, the company's gas investment had a cumulative oxygen production volume of 3.2 million Nm3/h. The gas retail business company has sold about 2.4 million tons of liquid and 430,000 bottles of bottled gas throughout the year. At the same time, the company accelerated the strategic layout of the special gas sector and accelerated the integration of SEAT Electronics and Wanda Gas, becoming the first domestic enterprise to also independently develop successful liquid helium tanks and achieve mass production, directly imported helium sources, and the ability to guarantee the supply of electronic-grade helium gas.
The hydrogen energy industry is accelerating, and the layout of liquid hydrogen is worth looking forward to. Currently, the company continues to expand integrated manufacturing and processing projects around the country's hydrogen transportation development planning needs, explore application scenarios for liquid hydrogen storage and transportation, etc., and focus on building a hydrogen energy equipment industry base in Hangzhou and Oxygen. According to the company's annual report, the company is currently investing in research and development of technology and equipment related to liquid hydrogen pressurized gasification systems. The goal is to develop 100 MPa high-pressure liquid hydrogen vaporizers and 90 MPa liquid hydrogen pressurized gasification systems, and positive progress is expected in the future.
Investment rating: The company's net profit for 2024-2026 is estimated to be $1,386 billion, $1,707 billion, and $1,910 billion, respectively. Corresponding PE is 20x, 17x, and 15x, respectively, covered for the first time, giving it an “increase in wealth” rating.
Risk warning: risk of gas price fluctuations; risk of failure of profit forecasting and valuation models