The gross profit of intelligent manufacturing was +44.72% YoY in 2023. The company's overall gross margin was relatively stable. In 2023, the company achieved operating income/net profit of 26.6/257 million yuan, +9.6%/+1.1% YoY (adjusted caliber). In 1Q24, the company's revenue/net profit ratio was -2.1%/-13.1% to 409.-0.27 billion yuan. In 2023, the company's intelligent manufacturing sector achieved rapid growth. Its revenue/gross profit ratio was +30.18%/+44.72%, respectively, and the company's overall gross margin stabilized at around 45%. In 2023, the company's DPS was 0.112 yuan, with a dividend ratio of 35.02%. Considering the significant slowdown in the growth rate of the testing business in the past two years and lowering expectations for the future growth of the company's testing business, we expect the company's net profit to be 2.88/3.28/370 million yuan in 2024-2026 (previous value: 3.51/4.29/100 million yuan), corresponding to EPS of 0.36/0.41/0.46 yuan.
Considering the company's ROE industry leadership, the company was given 27.5xPE for 24 years (comparable to the average PE expected value of 21.4x by the company Wind), with a target price of 9.85 yuan (previous value: 12.24 yuan), maintaining a “buy” rating.
Revenue from all business segments achieved year-on-year growth in 2023. Environmental testing revenue was +18% year-on-year in 2023. By sector, the company's inspection/testing/certification/inspection instruments and intelligent manufacturing/measurement calibration/scientific research and technical services achieved revenue of 18.11/1.02/4.83/0.200 million yuan, respectively, +3.8%/+30.2%/+154.3%/+6.6%. Among them, the rapid year-on-year revenue growth in the inspection, testing and intelligent manufacturing sector in 2023 is mainly due to the company successively winning bids for automation projects for large-scale steel and cement companies such as Qilianshan Cement and Nanfang Cement. In 2023, the company and its subsidiaries issued a total of 1,4091 million inspection reports. The company's inspection and testing business revenue accounted for 68% of the company's total revenue. Of these, engineering/materials/environmental/food and agricultural testing achieved revenue of 7.90/3.98/4.69/ 154 million yuan respectively, +7%/+4%/+4% over the same period last year.
The company's overall gross margin was +0.4pp in 2023, of which the gross margin of intelligent manufacturing was +4.1pp. in 2023, the gross margin of the company's inspection testing/certification/inspection instruments and intelligent manufacturing/measurement calibration/scientific research and technical services was 45.31%/46.58%/45.77%, -0.31/-0.33/+4.24/-2.10pp. Due to the growth in the scale of other businesses, the gross profit share of the testing business in 2023 was -5pp to 69% year over year. In 2023, the gross margin of engineering/ materials/ environmental/ food agriculture testing was -1.72/+0.07/+3.34/ -4.44pp to 37.28%/57.57%/47.92%/46.83%, respectively. The company focuses on transformation and upgrading, engineering inspection to infrastructure and existing construction fields, and traditional building materials inspection to high-end inspection products and technical consulting and services. The impact of the reduction in the new real estate construction area is expected to continue to weaken on the company.
Risk warning: The recovery of the real estate industry fell short of expectations, acquisition progress and integration capacity fell short of expectations, and the decline in expenses fell short of expectations.