Revenue in 2023 increased 9.10% year over year, and net profit to mother increased 18.16% year over year. The company achieved revenue of 2,133 billion yuan in 2023, up 9.10% year on year; net profit to mother of 269 million yuan, up 18.16% year on year, gross margin/net margin was 31.69%/12.60% respectively, with year-on-year changes of +1.84/+0.97 pcts. The increase in profitability was mainly due to an increase in the share of high-margin nuclear power business and energy saving business. Expenses were generally stable during the company period. In the first quarter of 2024, the company achieved revenue of 571 million yuan, a year-on-year increase of 14.78%, a year-on-year increase of 10.17%, gross margin/net margin of 30.31%/14.67% respectively, a year-on-year change of -0.14/ -0.61 pcts, and overall operation was steady.

Revenue from energy saving services grew rapidly, while metallurgical revenue declined year on year. In the metallurgical sector, the company achieved revenue of 364 million yuan in 2023, a year-on-year decrease of 22.42%, mainly due to a decline in the prosperity of the steel industry. The decline in project commencement led to a decrease in valve demand, and the overall gross margin of the metallurgical industry was stable. In 2023, the company signed a new metallurgical order of 451 million yuan, a year-on-year decrease of 6.82%; in the field of energy saving services, it achieved revenue of 261 million yuan in 2023, an increase of 64.01% over the previous year. The sharp increase was mainly due to the commissioning of Jinxi Co., Ltd. and Hangang Nengjia Steel Project and the beginning of benefit sharing.

Benefiting from the development of the nuclear power industry, the company's nuclear power business is expected to grow rapidly. In 2023, the company's nuclear energy achieved revenue of 694 million yuan, an increase of 10.49% over the previous year. The increase was mainly due to the continuous approval of new nuclear power units in 2020-2022. In 2023, the company added 803 million yuan in nuclear energy orders, an increase of 16.88% over the previous year. Since restarting in 2019, the nuclear power industry has approved 4/4/5/10/10 units respectively in 2019-2023, and is expected to maintain an approval rate of 8-10 units per year in the future. As a nuclear grade butterfly valve and ball valve faucet, the company's market share exceeds 90%, and it is expected to benefit deeply. Furthermore, China's spent fuel reprocessing is imminent, and the market space is broad. The company has entered the field of spent fuel treatment and received orders for various projects. The improvement in the nuclear power industry and the broad space for spent fuel drive the company's nuclear energy performance to continue to grow.

Actively expand the fields of hydrogen energy and semiconductor valves to further open up room for growth. In the field of hydrogen energy, the company's products are mainly 70-105 MPa high-pressure hydrogen valves. Application scenarios include hydrogen refueling stations, logistics trucks, forklifts, drones, etc., which have been used in leading domestic hydrogen energy companies. At the same time, the company's 70MPa vehicle pressure relief valve has been delivered to users, and some products have been exported; in the semiconductor field, the company mainly develops and produces special valves for semiconductor equipment. Currently, the vacuum pressure control butterfly valves and ultra-high purity process gas valves developed by the company have entered the user verification stage.

Risk warning: changes in nuclear power development policies; new business development falls short of expectations; fluctuating raw material prices.

Investment advice: The company is a leader in special valves, and the nuclear power business benefits from the boom in the industry, but considering the general boom in the metallurgical and petrochemical industries, we lowered the 2024 profit forecast and added the 2025-2026 profit forecast. The net profit for 2024-2026 is 3.41/4.00/465 million yuan (the original value in 2024 was 461 million yuan), corresponding to PE 19/16/14 times, maintaining a “superior to the market” rating.