Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 1,381 billion yuan, an increase of 1.95% over the previous year, and net profit attributable to the mother of 84.8196 million yuan, an increase of 15.01% over the previous year. Among them, the fourth quarter achieved revenue of 498 million yuan, a year-on-year decrease of 2.16%, and net profit attributable to parent of 477.458 million yuan, an increase of 39.30% over the previous year. In the first quarter of 2024, the company achieved revenue of 269 million yuan, an increase of 29.51% over the previous year, and net profit attributable to the parent of 12.8867 million yuan, an increase of 483.00% over the previous year.
The 23-year results maintained an upward trend, with significant growth in 24Q1. (1) Revenue confirmation accelerated: Looking at the subregion, domestic revenue increased 7.44% year on year, accounting for 59.02% of revenue, and overseas revenue decreased 5.32% year on year, accounting for 40.79% of revenue. The company's revenue increased significantly year-on-year in 2024Q1, and it is expected that the company's large on-hand orders are gradually being recognized as revenue. (2) Gross margin increased for the full year of 23, and gross margin declined in 24Q1: gross sales margin for the full year of 2023 was 28.72%, up 1.62 percentage points year on year. Among them, domestic gross profit margin was 24.89%, up 2.11 percentage points year on year, and overseas gross profit margin was 34.04%, up 1.55 percentage points year on year. 2024Q1 gross margin was 25.63%, down 3.78 points year over year. We determine that the 24Q1 gross margin decline was mainly due to disturbances confirmed by some low gross margin projects. (3) The expense ratio increased slightly during the 23-year period, and declined significantly in 24Q1: the company's expense ratio for the 2023 period was 21.31%, up 1.38 percentage points year on year. Among them, sales, management, R&D, and finance expenses were 8.77%, 9.29%, 2.79%, and 0.46%, respectively, up 0.97, 0.62, 0.16, and 0.37 percentage points year-on-year, respectively. The increase in sales and management expense ratios is mainly due to an increase in employee salaries, and the decline in financial expense ratios mainly benefits from an increase in exchange earnings. The 2024Q1 company's expense ratio for the period was 20.90 percent, down 5.9 percentage points from the previous year.
Among them, sales, management, R&D, and financial expense ratios were 7.81%, 11.98%, 1.98%, and -0.87%, respectively, down 1.44, down 1.74, up 0.27, and 2.99 percentage points, respectively. (4) Go to battle fully and lightly. The company accrued bad debt provisions of 29.5083 million yuan for the full year of 2023, and 15.0396 million yuan for the full year of 2022. If none of them are taken into account, it is estimated that net profit due to mother will reach 114 million yuan in 2023, and the year-on-year growth rate will reach 25.69%. After removing the burden, it is expected that it will go light in the future. (5) Significant improvement in cash flow: Net cash flow from operating activities for the full year of 2023 was 197 million yuan, an increase of 229 million yuan over the previous year. The net cash flow from 2024Q1 operating activities was RMB 10.253,500, an increase of RMB 29.7063 million over the same period last year.
Ongoing orders and contract liabilities have increased, and future performance flexibility can be expected. The company's on-hand orders at the end of 2023 amounted to 3.623 billion yuan, an increase of 43.15% over the previous year. The scale of on-hand orders was about 2.6 times the company's annual revenue in 2023. The company's contract debt reached 1,162 billion yuan at the end of 2023, an increase of 77.38% over the previous year. 2024Q1's contract liabilities continued to increase to 1,566 billion yuan, up 135.74% year on year and 34.79% month on month. Considering that the company's order confirmation cycle is generally 1-2 years, the flexible release of subsequent performance can be expected.
A domestic technology leader in cooling towers, focusing on domestic alternatives to nuclear power and liquid cooling. We believe that the current market has insufficient understanding of the company's potential position and space in the field of nuclear power and AI liquid cooling: 1) Nuclear power: In nuclear power plants, there are two important cooling systems, namely conventional islands and nuclear islands. The technical threshold within the nuclear island is high, and it was previously monopolized by foreign products. The company has been deploying nuclear power cooling towers for many years. With its first-mover technology advantage, it has already received an order for cooling towers within the nuclear island in 2023 and has begun to lead the industry in domestic replacement. 2) Liquid cooling: Currently, the focus of the secondary market is mainly on the secondary side near the chip, while ignoring the essential equipment on the primary side - the cooling tower.
Currently, it is mainly monopolized by US companies. As a leader in the domestic cooling tower industry, Seagull is actively preparing relevant certifications, and there is plenty of room for domestic alternatives.
Profit forecast and valuation: Considering the company's sufficient on-hand orders and the growth potential for nuclear power, AI liquid cooling, hydrogen energy, etc., we maintain our profit forecast. The company's net profit for 2024-2025 is 111 million yuan and 143 million yuan, respectively, and an additional 2026 forecast is 179 million yuan. Corresponding to the stock price PE on April 26, the PE is 18X, 14X, and 11X, maintaining the “gain” ratings.
Risk warning: Overseas business progress is blocked, AI computing power release falls short of expectations, green hydrogen industry development falls short of expectations