Incident: The company released its 2023 annual report. In 2023, it achieved operating income of 43.798 billion yuan, a year-on-year increase of 5.59%, and net profit to mother of 31 million yuan, a year-on-year decrease of 52.09%; mainly due to loss of 42 million yuan in investment income and loss of 130 million yuan in credit impairment. 2023Q4 achieved operating income of 10.158 billion yuan, a year-on-year decrease of 1.35%, and achieved net profit of 62 million yuan to mother.
Organizational system construction has achieved remarkable results, and profitability is expected to continue to improve. In 2023, the company carried out in-depth organizational system optimization work, formed four major divisions, and established a complete quality responsibility organizational structure and quality risk management mechanism. In terms of cost control, the company actively promoted supply chain finance business and carried out annual collection work for the first time, effectively reducing the price of raw materials. In addition, the company completed the sale of 52 non-cooperative bank accounts, promoted banks within the cooperative to increase comprehensive credit lines, use various financial instruments to complete upstream and downstream payments, and pressure down financial costs through multiple channels. The company's interest expenses in 2023 were about 475 million yuan, a year-on-year decrease of 8.81%.
The company's profitability is expected to continue to improve, with gross margin rising 0.18pct year-on-year to 5.30% in 2023.
The company continued to win bids for submarine cable projects in 2023, and is optimistic about the release of subsequent results. Affected by factors such as approval from various parties, China's seabreeze construction pace was slow in the first half of '23, leading to delays in product delivery and revenue recognition for submarine cable companies; in the second half of '23, the overall construction progress of China's seabreeze project ushered in marginal acceleration, and relevant submarine cable plants are expected to benefit.
The submarine cable projects that the company won the bid for in 2023 include the 220kV submarine cable for the Huaneng Shandong Peninsula North BW site, the 220kV submarine cable for the 500,000 kilowatt seabreeze project at the Hainan Dongfang CZ8 site, and the 220kV submarine cable for the Tianjin Nangang Seabreeze Demonstration Project. The winning bid amounts were 115 million yuan, 191 million yuan and 143 million yuan respectively. Continued bid wins highlight the competitiveness of the company's submarine cable products, and in-hand submarine cable orders can effectively support the company's future performance growth.
Continuing to develop diversified markets, brand influence continues to grow. In the power market, the company achieved new development in the three power generation products, and the power generation system was fully shortlisted; in the new energy market, establishing cooperative relationships with leading wind power companies, and continued to make breakthroughs in the submarine cable market, extending its business to submarine cables for offshore photovoltaic power generation; in the nuclear power market, the company became the only cable enterprise member unit of the “Guoguo No. 1” industry chain alliance, and successfully obtained the first order in the field of special cables and connector cable components; in the military market, FM series products entered the new aircraft product catalog and selected an aviation industry helicopter industry for the first time The full unmanned helicopter wiring project has also successfully served models such as ARJ21, C919, and CR929.
Maintaining the “gain” rating: In 2023, the overall construction of China's ocean wind project was slow, and the delivery of the company's submarine cable products was further affected. We lowered our profit forecast for 24/25 and introduced a profit forecast for 26. We expect the company to achieve net profit of 3.98/5.54/688 million yuan in 24-26 (28% down/20% /increase), corresponding EPS of 24-26 of 0.29/0.40/0.50 yuan, and the current stock price corresponding to 24-26 PE is 14/10/8 times. As a leading enterprise in the traditional wire and cable industry, the company relies on China Aviation Group. Its submarine cable products are highly competitive in the field of offshore wind power and maintain an “increase” rating.
Risk warning: Risk of policies falling short of expectations, risk of ocean wind construction falling short of expectations, risk of raw material price fluctuations.