The company achieved net profit of 159 million yuan for the full year of '23, a year-on-year decrease of 24.78%. The company issued its annual report, achieved revenue/net profit to mother of 30.58/ -24.78% year-on-year, and realized net profit deducted from non-current assets of 122 million yuan for the whole year, or -34.36% year-on-year. Non-recurring profits and losses were mainly due to non-current asset disposal gains and losses. Among them, Q4 achieved revenue/net profit to mother of 290 million yuan in a single quarter, -67.35%/-554.66% year over year, net profit of -33 million yuan after deducting non-attributable net profit of -0.3 million yuan, or -343.90% year on year.

Admixture sales declined slightly, and efforts were made to expand overseas markets

The company's revenue from the admixture business in '23 was 2,241 billion yuan, down 11.04% year on year, of which sales volume was 1.35 million tons, a slight decrease of 2% year on year, and the price was 1,660 yuan/ton, down 9% year on year. The average price of ethylene oxide fell 12% year on year in '23. Benefiting from lower raw material prices, the gross margin of the company's admixture business increased by 1.76 pct to 24.2% year on year, achieving net profit of 141 million yuan, a decrease of 15.6% year on year. By the end of '23, the total domestic synthesis production capacity reached 1.389 million tons, ranking first in terms of market share in Fujian, Guizhou, Chongqing, Hainan, Shaanxi, and Shanghai. The market share in the Yangtze River Delta and Pearl River Delta regions has accelerated markedly.

The company also responds positively to the country's “Belt and Road” development strategy, leading the overseas layout of its peers. In 23, the company added an admixture industry base in Laos, covering Southeast Asian markets such as Vietnam and Thailand. In 24, the company plans to increase its overseas layout and strive to establish another overseas base. We believe that with the gradual release of new production capacity, the company's market share in domestic and foreign markets is expected to further increase.

Technical service revenue declined. The company that promoted the development of “new products, new markets, and new fields” in '23 was 421 million yuan, down 10.15% year on year, and gross margin fell 0.95 pct to 32.62% year on year. Ultimately, net profit was 17.58 million yuan, down 38% year on year. Although the commencement of domestic infrastructure construction projects in '23 fell short of expectations, the company actively developed the market, the inspection business of major engineering and traffic engineering continued to grow, and the inspection qualifications and projects of the Electronic and Electrical Testing Center continued to expand. At the end of '23, Jianyan Testing obtained authorized laboratory qualifications from Cyrus Motors and Dongfeng Liuqi, which can provide testing, data and reporting services for its electronic component suppliers. In '24, the company will focus on “new products, new markets, and new fields”. Traffic engineering and electronic and electrical testing are still the main growth points, and the NEV inspection market is expected to contribute new volume.

New energy, digital construction, etc. are expected to empower the company's growth. Maintaining a “buy” rating company is the first overall listed construction research institution in China. The additive+inspection business is two-wheel drive, and the layout in the fields of new energy and AI intelligent buildings is expected to empower the company's future growth. The dividend rate for 23 reached 36%, which corresponds to the current dividend rate of 2.2%. Taking into account the decline in performance in '23, the net profit forecast for 24-25 was lowered to 200/240 million yuan (previous value: $30/370 million), and the estimated net profit for '26 is $30 million. Considering the company's leading position, with reference to comparable companies, the company was given a target PE of 16 times in 24 years, with a target price of 4.48 yuan, maintaining a “buy” rating.

Risk warning: Production capacity investment falls short of expectations, demand falls, raw material prices have risen sharply, new energy and other business expansion progress is lower than expected, etc.