incident. The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved a total operating income of 1,258 million yuan, +40.65% year-on-year; realized net profit of 325 million yuan, +33.83% year-on-year.

2024Q1 achieved total revenue of 368 million yuan, +30.23% year over year; net profit to mother was 87 million yuan, +34.95% year over year.

The company's revenue and profit both increased, and new business performance was good. The company achieved both revenue and profit growth in 2023. With the continuous improvement of the company's technical level and increasing market recognition of the company's products, the company maintained continuous profit. The total revenue of digital printing equipment was 612 million yuan, +32.44% year-on-year, and gross margin was 45.29%; ink revenue was 411 million yuan, +8.17% year-on-year, with a gross profit margin of 53.87%. In addition to the company's original business, Yingkejie and TEXPA, which were acquired in September 2022 and July 2023, respectively, also generated revenue for the company. Digital printing equipment revenue was 63 million yuan, with a gross margin of 44.14%; automated sewing equipment was 105 million yuan, with a gross margin of 23.46%.

The company continues to expand its business scope, and digital printing production capacity continues to increase. The company focuses on continuously consolidating the advantages of digital printing equipment in the textile field, while actively expanding the equipment space for various industrial applications such as book printing, building materials finishing, and corrugated paper printing, and has achieved positive results. In 2023, the company's “Intelligent Factory with an annual output of 2000 sets of industrial digital inkjet printing equipment and consumables” IPO fundraising project was officially put into operation, the basic construction of the “Intelligent Production Line for Industrial Digital Printing Equipment with an annual output of 3,520 sets” has been completed, and the digital printing production capacity has been further increased.

The digital printing industry is rapidly replacing traditional processes, and the company is committed to achieving industry-leading levels. According to the company's 2023 annual report, the digital inkjet printing equipment and consumables industry maintained rapid growth during the year. The expansion of digital inkjet ink production and the continuous decline in costs brought about by economies of scale promoted the accelerated replacement of digital printing processes with traditional printing processes, making digital inkjet printing enter a healthy development path. As a leading solution provider in terms of technology level and market share in the industry, in 2024, the company will lay out automated sewing equipment horizontally on the basis of consolidating the market share of the original digital printing equipment to accelerate the implementation of the “digital equipment+intelligent factory+fast reverse supply chain” operation model; at the same time, promote the development of emerging markets and actively develop overseas.

Implement employee stock ownership plans to further develop the company. The company issued the “2024 Employee Stock Ownership Plan Management Measures” on April 30. While fully motivating employees, it imposes corresponding restrictions on employees, protects the interests of the company and shareholders, and promotes the further development of the company. As mentioned in the shareholding plan, the company's performance assessment requires a net profit growth rate of not less than 30% in 2024; in 2025, based on 2023 net profit, the cumulative net profit growth rate for 2024 and 2025 should not be less than 200%.

Investment advice. Global industrial printing is in a stage of rapid development. Digital printing has characteristics such as green, flexible and intelligent, and has broad development prospects. As the first enterprise in the domestic industry and with leading technical standards, the company has advantages in the entire textile industry chain. Customers are stable at home and abroad, and its current fund-raising projects are steadily helping to increase production capacity. The future market space is broad, and for the first time, it has a “gain” rating.

We expect net profit to be 4.23, 551, and 652 million yuan for 2024-2026, EPS of 3.51, 4.57, and 5.41 yuan, and PE of 32.2, 24.7, and 20.9 times, respectively.

Risk warning: core competitiveness risk; overseas market risk; risk of reliance on outsourcing of core raw material nozzles for digital printing equipment; risk of exchange rate fluctuations; industry risk.