Core views:
Event: The company announced the 2023 Annual Report and the 2024 First Quarter Report. In 2023, the company achieved operating income of 45.103 billion yuan (YOY +17.82%), achieving net profit of 779 million yuan (YOY +132.18%); in the first quarter of 2024, the company achieved operating income of 11.402 billion yuan (YOY +24.42%), and achieved net profit of 88 million yuan (YOY +167.82%).
Comment: Marine low-speed engine production and new contracts reached record highs, and the penetration rate of green low-carbon engines continued to increase. On the revenue side, the shipbuilding industry signed a new contract of 27.598 billion yuan (YoY +47.32%) in '23, and completed a total industrial output value of 18.244 billion yuan (YoY +36.49%). The company produced 403 low speed marine aircraft (YoY +10.71%) and received 560 new marine low speed aircraft (YoY +42.49%). On the pattern side, the leading pattern was further concentrated. The domestic market share of the company's low-speed marine diesel engines reached 78%, and the global market share reached 39%. In the application industry, new contracts of 26.737 billion yuan (YoY +13.10%) were signed in 23 years, and the total industrial output value was 21,649 billion yuan (YoY +16.12%). In an emerging industry, the company's dual-fuel mainframe production and sales reached a new high. It undertook 133 LNG dual-fuel engines and 34 methanol dual-fuel engines in batches. The number of new signings increased by 79.73% and 41.67%, respectively, over the same period last year, and achieved a breakthrough of zero for ethane dual-fuel mainframes. On the profit side, gross margin increased 0.44pcts year-on-year to 13.28% in '23. The cost side was mainly affected by competition in the supply of major diesel engine components, and the overall cost of raw materials increased by more than 20%. The 24Q1 gross profit margin was 10.65%, down 6.90 pcts from 23Q4, mainly affected by the pace of delivery in defense and application industries. On the cost side, the fee rate for the 23-year period was 11.11%, up 0.05 pcts year on year; the cost rate for the 24Q1 period was 8.87%, down 1.18 pcts year on year. On the balance sheet, contract debt at the end of the first quarter of '24 was 17.496 billion yuan, up 19.28% from the beginning of the year. On the cash flow statement, net cash flow from operating activities in '23 was 4.598 billion yuan, an increase of 48.41% over the previous year.
Profit forecast and investment advice: The company's 24-26 EPS is expected to be 0.64, 1.04, and 1.33 yuan/share, respectively. Considering the company's leading position in ship power, we maintain the company's judgment of a reasonable value of 24.12 yuan/share unchanged, corresponding to the PE valuation 38 times in 24 years, and maintain the “gain” rating.
Risk warning: risks in the shipping industry, risks in the automotive industry, risk of price fluctuations of major raw materials, risk of exchange rate fluctuations.