The company's net profit for 23 years was 390 million yuan, up 52.15% year on year. The company released the annual report for '23 and the quarterly report for '24. It achieved revenue/net profit to mother of $56.49/ 390 billion yuan for the full year, +19.69%/+52.15% year over year, and realized net profit without return to mother of 350 million yuan for the whole year, +68.19% year over year. Among them, Q4 achieved revenue of 1,561 billion yuan in a single quarter, +57.52% year-on-year, and net profit attributable to mothers/net profit of 0.933/76 billion yuan, turning a year-on-year loss into a profit. 24Q1 achieved revenue/net profit to mother of 1,493/82 million yuan, +21.05%/+5.55% year-on-year, and realized net profit without deduction of 78 million yuan, or +14.12% year-on-year.
Sales of refractory materials increased, and lower costs led to an increase in gross margin
Revenue continued to grow in 23Q4 and 24Q1, which we expect is mainly due to increased sales volume. By business, the revenue from the refractory materials/other (mainly metallurgical furnace materials) business was $42.3/1.42 billion, respectively, +12.2%/+49.4% compared with the same period last year. In terms of the refractories business, affected by the company's steady development of market share, sales reached 802,000 tons +14.83% year over year, and the estimated average price reached 5,271 yuan/ton of -2.3% year over year. Affected by the company's internal cost reduction and efficiency and the reduction in raw material prices, the gross margin of refractory materials reached 23.4% +2.87pct year-on-year.
Looking at the sub-model, revenue from the full package/direct sales model for refractory materials in '23 was +17% and -14%, respectively, and the revenue from the full package model accounted for +3.6 pct to 87.9% year over year. By region, domestic and foreign revenue in '23 reached +20%/+17% year-on-year respectively, reaching 5.31/340 million yuan, and gross margin of +1.4/-0.5pct year-on-year respectively reached 18.1%/22.1%. The company currently has an annual production capacity of 750,000 tons of refractory materials, and the 24-year operating revenue/net profit target is set at 6.214/429 million yuan, all of which are 10% higher than in '23, and we are optimistic about the company's future development.
Profitability increased year-on-year in '23, and expenses were optimized
The company's overall gross profit margin in '23 was 18.37%, +1.27pct year on year. Among them, the overall gross profit margin in Q4 was 10.49%, and +3.88/-10.49pct yoy, respectively. The cost ratio for the 23-year period was 8.79%, or -1.04pct year on year. Among them, the sales/management/ R&D/finance expenses ratio was +0.20/+0.02/-1.59/+0.33pct year over year, respectively. The increase in sales expenses was mainly due to an increase in personnel remuneration, office expenses, etc. The company achieved a net profit margin of 7.03% in '23, +1.50pct year-on-year. The balance ratio at the end of '23 was 38.20%, +3.85pct. Net operating cash flow in '23 was -160 million yuan, which turned negative year on year, mainly due to the current payment ratio of +21.06 pct, which reached 90.54% year on year. The 24Q1 company's overall gross profit margin was 15.78%, -4.03/+5.29pct YoY, and the net margin was 5.63%, and -0.52pct YoY.
Prospects for the layout of the entire industry chain are promising, maintaining a “buy” rating
As one of the largest complete contractors for steel refractories in China, the company's advantages such as the layout of the entire industry chain and the “overall contracting” business model may be further highlighted. The company's “three hundred” strategic goals have been firmly advanced in 25 years, and the company's growth prospects are worth looking forward to. Considering the increase in the company's performance, the company's net profit for 24-25 was raised to 49/590 million (previous value: 38/460 million), and the forecast for an additional 26 years was 680 million. Referring to comparable companies, the company was given a target PE of 11x for 24 years, corresponding to a target price of 4.53 yuan, maintaining a “buy” rating.
Risk warning: The boom in the steel industry is lower than expected, the price of raw materials fluctuates greatly, the pace of alloy business development is lower than expected, etc.