occurrences
On March 30, Western Superconductor released its 2023 annual report. In 2023, the company achieved revenue of 4.159 billion yuan, a year-on-year decrease of 2%; net profit to mother was 752 million yuan, a year-on-year decrease of 30%.
reviews
1. Affected by fluctuations in downstream demand, etc., the company adjusted its product structure in a timely manner, and revenue remained basically flat year-on-year. In 2023, the company actively responded to adverse effects such as the complex economic environment and fluctuations in downstream demand, and adjusted the product structure in a timely manner according to market demand. The annual revenue was basically flat year-on-year.
By product, revenue from titanium alloys was 2.05 billion yuan, down 22% year on year; revenue from superconducting products was 985 million yuan, up 58% year on year; revenue from superalloy was 474 million yuan, up 162% year on year. The company's gross sales margin was 31.87%, a year-on-year decrease of 7.58pcts, mainly due to a year-on-year decrease of 8.88pcts in the gross margin of titanium alloy products. The gross profit margin of the company's superconducting products was 34.39%, up 3.95 pcts year on year, and the gross profit margin of superalloys was 15.86%, up 12.57 pcts year on year.
2. Good cost control to strengthen R&D investment to lay the foundation for long-term development. In 2023, the company's four-fee rate was 14.45%, an increase of 2.75pcts year-on-year, mainly due to a 1.91 pcts year-on-year increase in R&D expenses. The company's management expense ratio was 4.68%, up 0.77 pcts year on year; sales expense ratio was 0.73%, down 0.30 pcts year on year; financial expense ratio was 1.12%, up 0.37 pcts year on year. In 2023, the company continued to increase R&D investment in major product fields to maintain good market competitiveness. The annual R&D expenses were 329 million yuan, an increase of 30% over the previous year, and the R&D expenses rate was 7.92%, an increase of 1.91 pcts over the previous year. At the end of 2023, the company had 355 R&D personnel, an increase of 16% over the previous year.
3. Superalloy and superconducting products have grown significantly. In terms of superalloys, the output in 2023 was 2,280 tons, up 95% year on year, and sales volume was 1,660 tons, up 127% year on year. The production and sales volume reached a record high. The main brand passed multiple “two machine” models and product certifications for multiple users, and the self-developed HT700 basically completed the application assessment of the 650℃ supercritical coal-fired power generation project, and the recycling production line construction progressed smoothly; in terms of superconducting products, the output value of superconducting wire for MRI surpassed 1 billion yuan for the first time. The global market share of superconducting wire for MRI increased dramatically, and the company further expanded superconducting materials and magnets in science Applications in engineering, medicine, semiconductors, photovoltaics, wind power, fusion, scientific research, etc.
4. Sales of titanium alloys declined due to fluctuations in demand, and the company continued to explore new fields. In 2023, the company's titanium alloy production was 10,696 tons, up 15% year on year, sales volume was 7,260 tons, down 16% year on year, and inventory volume was 5,642 tons, which may be affected by the pace of downstream customer demand. The company's single champion in the aviation titanium alloy bar manufacturing industry has passed the review by the Ministry of Industry and Information Technology. The dominant position in the aviation market is progressing smoothly. The promotion and application of high-end titanium in helicopters, commercial aircraft, commercial aviation engines, gas turbines, etc. has made significant progress, and has obtained supply qualifications for multiple models, laying a good foundation for the company to expand product applications and new markets. In addition, the company has developed a full range of melting technology for recycling titanium alloys.
5. Profit forecast and rating: We expect the company's net profit to be 8.42, 10.58, and 1,280 million yuan in 2024-2026, corresponding to the current stock price valuation of 30, 24, and 19 times, maintaining a “buy” rating.
Risk warning
The company's product demand and market expansion fell short of expectations; product price reductions exceeded market expectations; raw material price increases exceeded market expectations, etc.