Incidents. The company discloses its 2023 annual report and 2024 quarterly report. 1) In 2023, the company achieved operating income of 5.605 billion yuan, +9.24% year on year, net profit to mother of 910 million yuan, +0.83% year on year, net profit after deducting non-return to mother was 784 million yuan, -1.81% year on year. 2) In the Q4 quarter of 2023, the company achieved operating income of 1,523 billion yuan, +0.47% year-on-year, net profit to mother of 169 million yuan, -29.27% year-on-year, after deducting net profit of 104 million yuan, or -47.45% year-on-year. 3) In the Q1 quarter of 2024, the company achieved operating income of 1,192 million yuan, +6.70% year on year, and net profit to mother of 133 million yuan, -8.12% year on year.
The company's profitability has declined, and the overall cost rate is well controlled. In terms of profitability, 1) The gross margin and net margin of the company in 2023 were 48.06%/16.54%, respectively, -1.34/ -1.48pct; among them, the gross margin/net margin for the Q4 2023 quarter was 41.83%/11.1%, respectively, -6.28pct/-5.4pct. 2) Gross margin and net margin for the 2024 Q1 quarter were 45.28%/11.00%, respectively, -1.86/-2.26pct, and +3.45pct/-0.10pct month-on-month. In terms of cost ratio: 1) 2023: The cost rate for the period was 31.69%, +0.79pct year-on-year. Among them, the sales/management/finance/R&D expense ratios were 17.14%/6.13%/-0.01%/8.43%, respectively, with a year-on-year change of +0.48/+0.17/+0.2/-0.04pct. 2) Q4 2023 single quarter: The cost rate for the period was 35.76%, a year-on-year change of +2.88pct. Among them, sales/management/ financial/ R&D expense ratios were 19.03%/6.96%/0.57%/9.2%, year-on-year change +0.49/+0.64/+0.08/+1.67pct; 3) 2024 Q1 single quarter: the period cost rate was 33.41%, with a year-on-year change of +0.14pct. Among them, the sales/management/ financial/ R&D expense ratios were 18.36%/6.91%/-0.15%/8.29%, respectively, with year-on-year changes of +0.10/+0.08/-0.17/+0.13pct.
The cash flow situation is good. Cash flow in a single quarter was greatly affected by operating payments. The company's net operating cash inflow in 2023 was $1,122 million, +1.99% year over year; of these, 23Q4 net operating cash inflow was 718 million yuan, +10.62% year over year. The net operating cash inflow for the Q1 quarter of 2024 was -170 million yuan, mainly due to a decrease in operating receipts and an increase in operating payments.
Industrial testing and consumer goods testing are growing rapidly, and the pharmaceutical sector is under pressure in the short term. 1) Split by business segment:
① Life sciences: achieved revenue of 2,497 billion yuan, yoy +8.72%, gross profit margin of 47.90%, yoy-1.22pct; ② Industrial testing: achieved revenue of 1,091 billion yuan, yoy +20.72%, gross profit margin 43.56%, yoy+2.98pct; ③ Consumer goods testing: achieved revenue of 979 million yuan, yoy +36.72%, gross profit margin 44.77%, yoy-3.82pct; ④ Trade assurance: achieved revenue of 7.0 billion yuan, yoy +5.63%, gross profit margin 64.58%, yoy-1.27pct; ⑤ Medicine and medical services: achieved revenue of 337 million yuan, yoy -38.85%, gross profit margin 39.02%, yoy-7.21pct. 2) Split by region: ① Domestic: achieved revenue of 5.260 billion yuan, yoy +8.59%, gross profit margin 48.72%, yoy-1.11pct; ② Overseas: realized revenue of 345 million yuan, yoy +20.19%, gross profit margin 37.87%, yoy-4.19pct.
Continue to invest in strategic fields such as semiconductor chips and aeronautical testing to create a second growth curve. 1) Aeronautical testing field: The company has established mature laboratories in various aviation and low-altitude economic industrial clusters, which can provide various tests for civil manned and unmanned aerial vehicles, including environmental reliability tests, electromagnetic compatibility tests, and hazardous substance tests. In 2023, the company's aviation materials laboratory achieved profit for the first year since its establishment. 2) Semiconductor chip field: The company acquired 100% of Weisbo's shares at the end of '22 and added the Jinqiao chip test base in '23, making it the largest RA/ESD professional laboratory with the most comprehensive service capabilities among the company's five major chip semiconductor laboratories, expanding FA capabilities.
Profit forecast: We expect the company to achieve operating income of 64.51/74.36/8.556 billion yuan in 2024/2025/2026, up 15.1%/15.1% year on year; net profit to mother will be 10.19/11.27/ 1.05 billion yuan, up 12.0%/10.5%/15.8% year on year. Referring to the valuation of comparable companies, the company was given a PE valuation of 25-27 times in 2024, with a reasonable value range of 15.14-16.36 yuan/share (the company's EPS is expected to be 0.61 yuan in 2024), and the corresponding reasonable market value is 255-275 billion yuan. The “superior to the market” rating is given. Refer to the PB valuation. The company's 2024 PB is 3.63-3.92 times (the PB range for comparable companies in 2024 is 1.59-2.79 times), leading companies give a certain valuation premium, which is reasonable.
Risk warning: risk of macroeconomic fluctuations; risk of merger and acquisition decisions and integration risks; laboratory investment falling short of expectations