Performance summary: In 2023, the company achieved operating income of 4.16 billion yuan (-1.6% YoY); realized net profit to mother of 752 million yuan (-30.3% YoY); net profit after deduction was 630 million yuan (-35.1% YoY), corresponding EPS of 1.16 yuan. The company plans to distribute a cash dividend of 7 yuan for every 10 shares to all shareholders, with a dividend ratio of 1.8%. The 2023Q4 Company achieved operating income of 1.07 billion yuan (+11.5% YoY, +9.7% YoY) and achieved net profit of 170 million yuan (YoY -23.4%, +5.2% month-on-month); rapid release of superconducting products, superalloy production and sales hit a year-on-year high: In 2023, the company actively responded to the adverse effects of complex economic environments and fluctuations in downstream demand, adjusted the product structure in a timely manner according to market demand, and the annual revenue remained flat year-on-year. In terms of revenue by product, high-end titanium alloy materials achieved revenue of 2.51 billion yuan (-22.0% YoY), superconducting products achieved revenue of 985 million yuan (YoY +57.9%), and high-performance superalloys achieved revenue of 474 million yuan (+162% YoY). The impact of downstream demand led to significant differentiation in the revenue of the three major businesses.
Looking at the split price, ① High-end titanium alloy achieved production and sales volume of 10,696/7260 tons (+15.1%/15.6%), and the average price of titanium alloy products was 345,000 yuan/ton (-7.5% YoY). The company's product output remained high. The decline in sales volume was mainly affected by fluctuations in downstream customer demand, which caused a large inventory backlog, but the company's product verification progress is still uneven. High-end titanium has made significant progress in the promotion and application of high-end titanium in the fields of helicopters, commercial aircraft, commercial aviation engines, gas turbines, etc., and has obtained significant progress in the promotion and application of high-end titanium materials in the fields of helicopters, commercial aviation engines, gas turbines, etc., and has obtained significant progress in the promotion and application of high-end titanium materials in the fields of helicopters, commercial aviation engines, gas turbines, etc. We It is estimated that the decline in average product prices was mainly affected by product restructuring; ② Superconducting products achieved production and sales volume of 1,730/1,769 tons (+69.8%/+59.4%), and the average product price was 556,000 yuan/ton (-0.9% YoY). Production and sales of superconducting products grew rapidly, mainly due to the company's low temperature superconducting products in nuclear fusion CRAFT projects, MRI instruments, photovoltaic MCZ, high-speed magnetic levitation and other relatively mature industrialized fields. At the same time, the company maintained batch supply in fields with relatively mature industrialization such as superconducting quantum computers and accelerated tumor radiotherapy devices. Breakthroughs have been achieved in the field to Expand new downstream application growth points; ③ High-performance superalloys achieved production and sales of 2280/1660 tons (+95.3%/+127%), the average product price was 286,000 yuan/ton (+15.5% YoY), superalloy production and sales reached a record high year on year. The main brands passed multiple “two machine” models and product certifications for multiple users, and the overall business achieved a sharp rise in volume and price;
Profitability by product differentiation was significant: in 2023, the company's gross sales margin/net sales margin was 7.6 pcts/-7.5 pcts to 31.9%/18.4%, respectively. The year-on-year decline in profitability was mainly due to a sharp drop of 8.9 pcts to 34.4% year on year, due to changes in product structure and a slowdown in customer delivery. Superconducting products and superalloy materials were still rapidly released, driving the profitability of the two businesses increased by 4.0 pcts/12.6 pcts to 34.4%/15.9%, respectively. The gross sales margin/net sales margin of the 2023Q4 company was -7.1 pcts/-3.8 pcts to 28.1%/14.5%, respectively. The month-on-month decline in gross margin is estimated to be affected by changes in product structure. The small month-on-month decline in net profit was mainly due to the increase in government subsidies in Q4, which led to a 326% month-on-month increase in “other income” to 96.12 million yuan;
The fund-raising project continues to advance, and there is no room for medium- to long-term growth: all the funds raised for the company's 2019 IPO project have been used and completed. The company raised 2,013 million yuan in capital through targeted funding in November 2021, and plans to invest 971 million yuan in the “High Performance Metal Materials Industrialization Project for Aviation”. The project plans to increase the total annual production capacity of 5050 tons of titanium alloy and 1,500 tons of superalloy after completion at the end of 2024. The investment progress will reach 43% by the end of 2023, and is expected to be ready for use in December 2024; the company plans to invest 474 million yuan in the “High Performance Superconducting Wire Industrialization Project” and the “Superconducting Industry Innovation Center” by the end of 2023. At 25%, the annual production capacity of superconducting wire for MRI is expected to increase to 2,000 tons after reaching a usable state on April 30, 2024. After the project is fully completed, the annual production capacity of the company's titanium alloy, superconducting wire and superalloy products will reach more than 10,000 tons, 2,000 tons and 6,000 tons respectively. There is no room for future growth with a steady increase in scale and competitiveness;
Investment proposal: China's aviation equipment release and domestic substitution of key materials provide an incremental foundation for the new aviation materials business. In the future, the company is expected to benefit from product structure optimization and scale-up effects. Continued expansion of the three major businesses will drive the company's rapid growth. We expect the company to achieve operating income of 48.6/58.9/7.29 billion yuan respectively in 2024-2026, up 16.9%/21.2%/23.7% year-on-year, and realized net profit to mother was 8.8/11.5/1.51 billion yuan respectively, up 16.5%/30.8%/ 31.5%, corresponding to PE29X/22X/17X, maintaining the “buy” rating.
Risk warning: The price of raw materials fluctuates greatly, the fund-raising project process falls short of expectations, terminal demand falls short of expectations, etc.