Incident: The company released its 2023 annual report. The company achieved revenue of 3.618 billion yuan, +30.06% year over year; net profit to mother of 492 million yuan, +1.33% year over year; net profit after deducting non-return to mother of 432 million yuan, +0.52% year over year.

Electric forgings have increased significantly, and profitability is under pressure in the short term. In 2023, the company's gross profit margin was 23.89%, year-on-year -1.47pct, net profit margin 13.6%, year-on-year -3.86pct. At the core business level, aerospace forgings had revenue of 1,129 billion yuan, +13.28% year over year. The company actively expanded the die forging market, completed supplier audits and certification, and cooperated with GE and RR to begin batch supply; petrochemical forging revenue was 929 million, +20.72% year over year, electric forging revenue of 862 million, +115% year over year, gross profit margin was 15.44%, year-on-year. The wind power production line contributed significantly.

Aerospace and new energy tracks continue to be strengthened, and downstream demand is picking up. In terms of expenses, the company's management/R&D/sales/financial expenses were 0.85/1.77/0.58-013 billion yuan respectively, of which R&D expenses were +43.18% compared to the same period, which meant that the company continued to increase its investment in product R&D in the aerospace and new energy industries. The company's notes receivable were $541 million, +126.2% from the beginning of the period, and accounts receivable of $1,184 million, +43.9% from the beginning of the period, due to an increase in the scale of business revenue; contract liabilities of $52 million, +119.2%% from the beginning of the period, due to increased downstream order growth and advance payments; inventory was $913 million, of which 445 million were raw materials, +29.61% from the beginning of the period.

Investment subsidiaries expand international layout, and new energy tracks continue to break through. The company announced on April 20, 2024 that it intends to invest in the establishment of a subsidiary Castpro Pte in Singapore. Ltd., improving the international layout, increasing the depth and breadth of market coverage, matching the needs of overseas customers, and further improving competitiveness. At the same time, the company actively lays out the new energy power sector, and wind power production lines have increased significantly; undertook a large number of nuclear power businesses. In January 2024, the scope of nuclear power licensing was continuously changed to increase licensing qualifications for reactor components and nickel-based alloys; the hydropower sector became an important supplier for Harbin Electric, Dongfang Electric, and Voith Hydropower.

Investment advice: The company's net profit for 24/25/26 is estimated to be 538/6.09/697 million YoY +9.3%/+13.1%/+14.6%, giving it an “increase in wealth” rating.

Risk warning: 1. Raw material prices fluctuate; 2. Fund-raising projects fall short of expectations.