Matters:

The company released the 2023 annual report and the first quarter report of 2024, and the company achieved revenue of 22.4 in 2023

100 million yuan, +2.2% year on year, achieved net profit of 200 million yuan, and realized net profit of 150 million yuan without return to mother, +67.1% year on year; in the first quarter of 2024, the company achieved revenue of 340 million yuan, -13.5% year over year, realized net profit to mother of 0.3 billion, +64.2% year over year, achieved net profit deducted of 20 million yuan, +768.4% year over year.

Commentary:

The electrolytic copper foil equipment business maintained high growth and high profits. In 2023, the company's electrolytic copper foil business achieved revenue of 1.14 billion, +93% (combined caliber), achieving a gross profit margin of 35.1% and a year-on-year increase of 4.9pcts; the company divested 100% of Suzhou Dawson Drilling and Mining Equipment Co., Ltd. in the second half of '23, so the revenue scale in Q1 fell 13.5% year on year, but the company's core holding subsidiary, Hongtian Technology's business maintained high growth, and the merger ratio for Hongtian Technology increased from 51% to 81% (compared to 23Q1).

Continuing to divest inefficient assets, the company plans to change its name to Hongtian Technology. The company has successively completed the divestment of some crude oil and gas drilling equipment related businesses in 22-23. In fiscal year 23, Hongtian Technology achieved revenue of 1.14 billion yuan, accounting for 50.80% of the company's total revenue, and achieved net profit of 260 million yuan, accounting for 127.28% of the net profit of listed companies. The company plans to change its full name to Jiangsu Hongtian Technology Co., Ltd.; the company will also continue to divest inefficient assets, and announced in April that it plans to sell 100% of the shares of the two wholly-owned subsidiaries of Suzhou Dawson Materials Co., Ltd. and Suzhou Dawson Machinery Co., Ltd.

Extend endogenously to build a high-end equipment manufacturing platform enterprise. In terms of vacuum coating equipment, Hongtian Technology, the holding subsidiary of the company, completed the delivery of vacuum magnetron sputtering equipment and the release of a new magnetron sputtering evaporation all-in-one machine in March; at the same time, in 23, the company participated in the ultrasonic roller welding equipment manufacturer Suzhou Daniu New Energy Technology Co., Ltd., and jointly funded the establishment of a joint venture “Hongrui Microelectronics Technology Co., Ltd.” with Anhui Ruishiwei Intelligent Technology Co., Ltd., to complete the equipment layout for vacuum coating, ultrasonic welding, and visual inspection.

Investment proposal: The company is a leader in electrolytic copper foil equipment. Composite fluid collector vacuum coating equipment has created the company's second growth curve. It has an epitaxial layout of equipment in the fields of ultrasonic welding, visual inspection, etc., and is expected to grow into a high-end equipment manufacturing platform enterprise. Considering the company's continued divestment of the traditional oil and gas drilling equipment business, the impact of equity incentive costs, and the progress of the industrialization of composite collector fluids, we expect the company's 24-26 net profit to be 2.88/3.80/475 million yuan respectively (the original forecast value for 24/25 was 36/472 million yuan, respectively), and the corresponding EPS was 1.38/1.83/2.28 yuan (the original forecast value for 24/25 was 1.76/2.27 yuan, respectively), and maintained at a target price of 34.6 yuan “Strongly recommended” rating.

Risk warning: Demand for downstream production expansion falls short of expectations; new product development or promotion progress falls short of expectations; rising raw material prices weaken profit levels; risk of shortage of core components.