Event: Bussan CUHK released its 2023 annual report. In 2023, the company achieved revenue of 580.16 billion yuan, a year-on-year increase of 0.6%; net profit to mother of 3.62 billion yuan, a year-on-year decrease of 7.9%; deducted non-net profit of 3.03 billion yuan, a year-on-year decrease of 3.1%; and earnings of 0.68 yuan per share, with a plan to distribute 2.1 yuan (tax included) for every 10 shares. While the global economy is facing downward pressure, the company's revenue continues to grow, and the results of the “two wings in one” strategy are beginning to show.
On the basis of “stable integration”, the “two wings” continue to flourish. In 2023, the company's smart supply chain integrated service/financial services/high-end manufacturing sector achieved revenue of 5422.2/149.5/23 billion yuan respectively, accounting for 93.5%/2.6%/4% of the company's revenue, and achieved total profit of 44.3/9.8/1.89 billion yuan respectively, contributing 60.7%/13.4%/26%. Among them, the gross profit margin of the high-end manufacturing sector was 16.8%, an increase of 3.3 pct over the previous year.
Give full play to the advantages of the industry and serve commodity allocation at a high level. The company is a leader in integrated supply chain services in China, and the business scale of core businesses such as metals, energy, chemicals, and automobile services all rank among the highest in the country. In 2023, it achieved sales of 71.516 million tons of steel, 37.555 million tons of iron ore, 554.85 million tons of coal sales, 208.45 million tons of chemical sales, 4.898 million tons of agricultural products, and 4.516 million tons of oil sales. Yuantong Auto ranked 7th among the top 100 automobile dealer groups in China in 2023.
Strengthen R&D and innovation, and strengthen and expand existing advantageous industries. In 2023, R&D expenses exceeded 1 billion yuan, an increase of 41% over the previous year, promoting a steady improvement in business performance in sectors such as wire and cable, tire manufacturing, and cogeneration.
In 2023, wire and cable achieved revenue of 8.39 billion yuan, up 10.1% year on year; tire manufacturing achieved revenue of 4.76 billion yuan, up 11.8% year on year; cogeneration achieved revenue of 3.13 billion yuan, up 0.8% year on year.
By increasing capital, Xintai Life expanded its financial footprint and acquired Qixin Company to enter the magnesium industry. The company strategically takes 33% of Xintai Life's shares, which is expected to utilize the value of financial licenses and empower pension and other industries; after completing the 82.3% share acquisition of Qixin Company, a leader in the domestic magnesium industry in November, Qixin achieved operating income of 775 million yuan and total profit of 504.017 million yuan. Qixin Company produced 67,900 tons of magnesium ingots, 441,000 tons of ferrosilicon, 1.05 million tons of coke, 45,500 tons of tar, 15,000 tons of crude benzene, and 373,300 tons of dolomite mining. At 8.3%, raw magnesium sales have ranked first in the domestic ranking for many years.
Profit forecast and investment advice: The company's 2024-2026 EPS is expected to be 0.79, 0.87, 0.95 yuan, and the corresponding PE is 6x, 5x, 5x. Considering the strong revenue stability of products and the continuous improvement in the gross margin of the high-end manufacturing sector. By acquiring domestic magnesium industry leaders and enhancing control over core resources, it is expected to activate new momentum for the development of the advanced manufacturing sector. We are optimistic about the company's medium- to long-term growth potential and maintain a “buy” rating.
Risk warning: commodity price fluctuation risk, futures market operation risk, industrial investment risk, etc.