Incident: Xiamen Guomao released its 2023 annual report. Annual revenue of 468.247 billion yuan, or -10.29% year on year, net profit attributable to mother was 1.915 billion yuan, or -46.72% year over year. Excluding the profit impact of remaining real estate projects in the same period in '22, a year-on-year decrease of about 20%; net cash flow from operating activities was 3.06 billion yuan, a significant increase of 775.98% year on year. Basic earnings per share were 0.64 yuan/share, and the cash dividend ratio increased to 57.56%. The dividend rate reached 6.9% at the close of April 24, 2024.

The supply chain sector was under pressure in the short term due to insufficient demand, and gross margin increased. The supply chain sector achieved overall revenue of 465.3 billion yuan, -7.93% year-on-year, and gross margin increased 0.04pct to 1.31%. Among them, 1) Revenue: The metal and metal minerals/energy chemical/ agriculture, forestry, animal husbandry and fishing sector achieved revenue of 2342/1314/94.1 billion yuan respectively, up -12.62%/1.02%/-8.57% year on year; 2) Volume: The operating volume of the metal and metal minerals/energy chemicals/agriculture, forestry, animal husbandry and fishery sector in 23 was 10631/6351/24.15 million tons, up -12.65%/21.47%/-3.02%; 3) Futures gross profit margin: 23-year metal and metal minerals/energy and chemical fisheries/agriculture, animal husbandry, animal husbandry and fishery sector Sector period The current gross profit margin is 1.36%/1.35%/1.18%, +0.27pct/-0.06pct/-0.98pct year-on-year.

The health technology sector has strengthened its layout through acquisitions and consolidated the foundation for development. In 2023, the health technology business achieved revenue of 737 million yuan, +64.82% year-on-year, and gross margin increased 18.29pct to 24.73%. In 2023, the company established medical devices as its core business, upstream medical devices as the main layout direction, and completed the acquisition of Pelte Healthcare, a leading provider of integrated solutions for minimally invasive surgery in China. In 2023, Pelter Healthcare achieved revenue of 506 million yuan, +20% year-on-year, and achieved net profit of 75.96 million yuan to mother, +80% year-on-year.

The supply chain business accelerated overseas, and the share of overseas revenue contribution increased to 14%. In 2023, the company's overseas revenue reached 65.7 billion yuan, -2.26% year-on-year, and gross margin increased 0.43pct to 2.49%. The company's trade volume along the “Belt and Road” exceeded 100 billion yuan, +8% year-on-year; trade volume with RCEP countries exceeded 97 billion yuan, +4% year-on-year.

Focusing on shareholder returns, the cash dividend ratio was 17.7pct higher than in '22, corresponding to the current dividend rate of 6.9%. The company plans to pay a cash dividend of 0.5 yuan (tax included) per share, with a dividend ratio of 57.56%, an increase of 17.7 pct over '22, corresponding to the current dividend rate of about 6.9%; a cumulative cash dividend of 4.970 billion yuan over the past 5 years (including this time).

We are optimistic about a recovery in demand, which will drive the company's business to grow rapidly, maintain a high ROE, and maintain a “gain” rating. The company's 2024-2026 net profit is expected to be 30.94/43.52/5,035 billion yuan, +61.60%/40.63%/15.70% YoY, and earnings per share of 1.40/1.97/2.28 yuan, corresponding PE 5.19/3.69/3.19 times, respectively.

Risk warning: sharp fluctuations in commodity prices, increased risk of impairment losses, geopolitical conflicts impacting the bulk supply chain business, falling short of expectations in the company's health technology business, and risk of exchange rate fluctuations.