Core views:
Event: The company announces the 2023 Annual Report and the 2024 First Quarter Report. Revenue, net profit to mother, and net profit excluding non-return to mother were 3.408 billion yuan, 3.19 million yuan, and 308 million yuan respectively, up 18.37%, -5.17%, and 9.83% year-on-year; in the first quarter of 2024, revenue, net profit to mother, and net profit without return to mother were 7.99, 0.95, and 92 million yuan, respectively, up 28.61%, 57.74%, and 66.90% year-on-year.
Foundry superalloy products are growing rapidly, and overseas business is expanding rapidly. Looking at a single quarter, 2023Q4 revenue and net profit attributable to mother were 989/084 million yuan, respectively (YoY +0.85%/-29.86%). By product, in 2023, the company achieved revenue of 22.97/7.17/351 million yuan (YoY +32.58%/+3.31%/-12.10%) for casting superalloy products/new superalloy materials and products, respectively, and the 2023 gross margin of the corresponding business was 31.72%/15.67%/38.51% (YoY+5.44/ -3.84/7.53pct), respectively. By region, the company's domestic revenue in 2023 was 3,059 billion yuan, up 12.03% year on year, and overseas revenue was 349 million yuan, up 134.85% year on year. On the cost side, the company's cost ratio increased 1.25pct to 14.80% year-on-year during the 23-year period, and the company's sales/management/ financial/ R&D expenses ratio was 1.70/7.36/0.67/ 5.07% (YoY+0.57/+0.91/-0.22/ -0.01pct), respectively. The increase in sales expenses was mainly due to the increase in sales scale and the increase in foreign market development expenses during the reporting period. The increase in management expenses was mainly due to the gradual commissioning of the project to build new subsidiaries, which led to an increase in related fixed costs. Furthermore, the company is actively expanding new businesses such as parts processing and additive manufacturing, and is expected to collaborate better with traditional main businesses, and its position in the industrial chain is expected to continue to stabilize.
Profit forecast and investment advice: EPS is expected to be 0.52, 0.64, and 0.79 yuan/share respectively in 2024-26. Considering the company's industry status, equipment modernization trends, foreign trade sentiment, and the possibility of improving yield under batch production of beneficiary models, combined with comparable company valuations, we gave the company a 24-year PE valuation of 45 times, corresponding to a reasonable value of 23.59 yuan/share, maintaining a “gain” rating.
Risk warning: raw material price fluctuations, policy adjustments, downstream demand and delivery falling short of expectations