The company's performance has good growth momentum. In 2023, the company's revenue was approximately RMB 1,008 million, up 33.37% year on year. Net profit to mother was approximately RMB 225 million, and net profit after deducting non-net profit was approximately RMB 211 million. Among them, intelligent mine communication system revenue was about 405 million yuan, up 40.64% year on year; intelligent mine monitoring system revenue was about 351 million yuan, up 38.52% year on year; intelligent mine centralized control system revenue was about 112 million yuan, 62.34% year on year; intelligent mining equipment supporting revenue was about 121 million yuan, up -16.63% year on year; in the first quarter of 2024, the company's revenue was about 225 million yuan, up 24.8% year on year. Net profit to mother was about 36.58 million yuan, up -13.64% year on year. 27.74 million yuan, a year-on-year increase of -28.76%.
In 2023, the company's comprehensive gross margin was about 45.95%, down about 3.7 percentage points from last year, mainly due to the decline in gross margin of equipment support and monitoring product lines. In terms of three fees, the sales expenses ratio is 9.47%, the management expenses ratio is 5.13%, and the R&D expenses ratio is 10.69%. The company has adopted a self-development route and is developing the chemical industry. We believe that in the next three years, the company's sales and R&D expenses will remain within a relatively reasonable range and will not become a downward trend.
The company's revenue is very stable and the annual and quarterly growth rate is relatively fast. We believe this is closely related to the company's industry. Smart mining is a high-threshold (entry conditions such as explosion-proof certificates, safety certification, etc.) industry. Once entered, it will obtain stable performance, and the scale of revenue requires each company to have complete technical and engineering capabilities.
The intelligent mining industry has obvious strong policy-driven characteristics. Intelligent mining refers to the industrial Internet of Things as the core, and next-generation information technology, including artificial intelligence, big data, etc., is deeply integrated with mine development technology and equipment to form an intelligent mining system with comprehensive autonomous sensing, real-time and efficient interconnection, autonomous learning, intelligent analysis and decision-making, dynamic prediction and early warning, and precise collaborative control. It can realize intelligent operation of the whole process of mine production, and ultimately improve the safety, increase staff efficiency, energy saving and consumption reduction in mine production.
The intelligent mining industry has obvious strong policy-driven characteristics. Since 2020, the country has issued a number of policies, which have strongly promoted the development of the industry. In January 2024, the State Council's Work Safety Committee issued the “Three-Year Action Plan to Address the Root of Work Safety”, which proposes to significantly enhance the level of mechanization, automation, informatization and intelligence of mines over a period of three years to build a number of automated and intelligent benchmark mines.
We believe that due to the strong policy characteristics of the industry, especially the high requirements for safety, and the company's complete product system and large-scale effects, it will continue to promote stable development and revenue expansion.
The company has a complete product system and a high level of self-development. The company's main product is an intelligent mine information system, which is integrated by the company after independently developing system software and hardware equipment and purchasing a small number of third-party components according to the specific informatization and intelligent needs of downstream customers. It is widely used in various coal mine production scenarios such as coal mining, tunneling, transportation, ventilation, drainage, etc., and can effectively meet the needs of coal mine production processes such as highly reliable transmission and interaction of underground information, visual monitoring and intelligent analysis of all scenarios of coal mine work. Intelligent centralized control of coal mine production equipment and intelligent upgrading of mining work surfaces, etc. The level of intelligence has achieved fewer or even unmanned operations, and finally achieved the industrial upgrading goals of improving coal mine production safety, reducing staff efficiency, and reducing energy consumption.
The overall architecture of intelligent mine-related information systems is generally divided into four levels: equipment sensing layer, network transmission layer, production execution layer, and platform application layer. It can cover the complete process from comprehensive autonomous perception, efficient information interaction, dynamic prediction and early warning, accurate collaborative control to intelligent analysis and decision-making, helping to improve the safety, reduce staff efficiency, energy saving and consumption in mineral resource production. The company's intelligent mining system mainly focuses on the application scenario requirements of the production execution layer, develops and constructs software and hardware for the equipment sensing layer and the network transmission layer, and further forms related intelligent mining platform applications. The company now has five categories of products: intelligent mine communication, intelligent mine monitoring, intelligent mine centralized control, intelligent mining equipment support, and “other” products, forming a relatively complete product system.
Judging from the overall structure of the intelligent mining platform, the company is a leading intelligent mining enterprise with few domestic products that can cover the three levels of intelligent mine sensing layer, transmission layer, intelligent application and decision-making layer. The company's integrated communication technology, personnel positioning technology, monitoring and other solutions have strong industry competitiveness and development potential.
The company expanded the second growth curve in the chemical industry. Traditional hazardous chemical companies have essential needs for intelligent chemicals. As the world's largest producer of chemicals, it has always been a key area for preventing and mitigating major safety risks. Currently, there are 7,000 enterprises with major hazardous chemical hazards across the country. The information infrastructure is weak and safety management methods are poor. Raising the level of informatization and intelligent construction is a real requirement. Policies such as the “14th Five-Year Plan” and “Three-Year Action Plan to Address the Root Causes of Production Safety (2024-2026)” reflect the importance the country attaches to the construction of safety informatization in chemical parks and hazardous chemical enterprises, and encourage relevant units to fully build a digital enterprise safety risk management and control platform integrating functions such as major hazard source management, dual prevention mechanisms, special operation management, intelligent inspection, and personnel positioning. Relying on its accumulated technical advantages in the fields of communication, monitoring, automatic control, etc., the company has continuously upgraded and extended enterprise technology through the construction of R&D centers, etc., and has achieved technical reference and expansion in the field of hazardous chemical production and non-coal mining, and ensures the efficient and sustainable growth of the company's business through a “strong chain+extended chain” approach.
We believe that the operating conditions of intelligent mines are much more complicated than those in the chemical industry, and that related systems and solutions are highly replicable in the chemical industry. They are an important market for the company to expand into the non-mining sector, and are expected to become the company's second growth curve in the future.
The company initiated a buyback program. At the end of 2023, the company issued a “Share Repurchase Report”. It plans to use its own funds to buy back some of the company's issued shares through centralized bidding transactions through the Shenzhen Stock Exchange trading system. The total repurchase capital is not less than RMB 30 million (inclusive) and not more than RMB 60 million (inclusive).
The repurchase period is 12 months from the date the board of directors reviews and approves the share repurchase plan. The purpose of the repurchase is to implement an equity incentive plan or employee stock ownership plan.
We believe that the company's stock price is undervalued, and the repurchase plan reflects the company's confidence in performance growth and demand for market value management.
Profit forecasting and investment advice. The company has a complete self-developed product system in the field of intelligent mining, and continues to maintain high performance growth. We believe that the company is one of the leading companies in the industry, and its stock price is undervalued. We expect the company's revenue for 2024-2026 to be 13.11/16.62/2,050 billion yuan, respectively, up 30.05%/26.81%/23.35%; net profit to mother was 2.48/ 2.78/ 312 million yuan, up 10.42%/11.79%/12.36%; EPS was 1.89/2.11/2.37 yuan, respectively. Referring to comparable companies, combined with the company's industry position in the field of intelligent mining, the company was given 25-30 times PE in 2024, with a reasonable value range of 47.21-56.66 yuan. For the first time, coverage was given, and a “superior to the market” rating was given.
Risk warning. Demand fell short of expectations due to declining prosperity in the coal mining industry; increased market competition led to revenue growth falling short of expectations and falling gross margin; the company's progress in expanding the non-mining market fell short of expectations, and rising R&D and sales costs led to a decline in net profit levels.