Description of the event
Zhefu Holdings 2023A achieved revenue of 18.95 billion yuan, a year-on-year increase of 12.9%; net profit to mother of 1,026 million yuan, a year-on-year decrease of 30.1%; net profit after deducting non-attributable net profit of 809 million yuan, a year-on-year decrease of 44.9%. Among them, 2023Q4 achieved revenue of 4.687 billion yuan, a year-on-year decrease of 5.29%; net profit to mother was 0.39 million yuan, a year-on-year decrease of 90.8%; and net profit after deducting non-return to mother was 121 million yuan, a year-on-year decrease of 96.1%.
2024Q1 achieved revenue of 4.454 billion yuan, a year-on-year decrease of 4.0%; net profit to mother was 311 million yuan, a year-on-year decrease of 37.1%; net profit after deducting non-return to mother was 79 million yuan, a year-on-year decrease of 69.2%.
Incident comments
The difference between the return and non-performance growth rate and revenue growth rate of companies in 2023 and 2024Q1 is mainly due to the impact of gross profit margin, investment income, fair value changes, and asset impairment.
2023:1) Revenue: Revenue growth in 2023 was mainly due to increased capacity utilization in the hazardous waste sector. Metal production and sales volume was 21.76/ 217,700 tons, respectively, up 16.2%/18.4% year on year. 2) Gross margin drag: gross margin was 13.02%, a year-on-year decrease of 4.38pct. It is speculated that, on the one hand, due to weak economic recovery, the amount of waste produced on the industrial side is low, and raw material prices have risen; on the other hand, the prices of nickel plate/cobalt/palladium/palladium/tin/zinc fell 13.3%/36.0%/33.7%/14.90%/14.31% year-on-year in 2023; the company has a production and operation cycle from procurement to sales, and narrowing the purchase and sales price gap will drag down profitability when prices decline. 3) Other drag items: Other revenue was 302 million yuan, a year-on-year decrease of 120 million yuan; asset impairment was -218 million yuan, compared to -146 million yuan in the same period last year, mainly due to lower inventory prices and depreciation of contract assets due to lower metal prices. 4) Enhancement items: Investment income was 138 million yuan, compared to -317 million yuan in the same period last year. The company's investment income includes hedging income, disposal of 2345 shares, and long-term equity investment income calculated by joint ventures according to the equity law.
First quarter of 2024:1) Gross margin fell 6.15 pct to 8.82%. It is estimated that the difficulties at the receiving end have not been completely alleviated. Furthermore, prices of some metals such as nickel/cobalt/palladium/zinc continued to decline year-on-year in 2024Q1. 2) Other drag items: Investment income was -0.79 million yuan, mainly due to a decrease in hedging instrument liquidation income; it was 133 million yuan in the same period last year. 3) Enhancement items: Asset impairment losses were -015 million yuan, compared to -90 million yuan in the same period last year; other income was 112 million yuan, an increase of 61 million yuan over the previous year.
Good cash flow. 1) The 2023A/2024Q1 payout ratio was 110.1%/104.3%, an increase of 2.3 pct/decrease of 0.1 pct over the previous year, maintaining a good repayment status. 2) The net cash flow from the company's operating activities in 2023 was 1.28 billion yuan, an increase of 209.0% over the previous year, mainly due to an increase in repayments and an increase in net margin income and expenditure from hedging operations. 2024Q1 net cash flow from operating activities was -240 million yuan compared to -394 million yuan in the same period last year. 3) The balance ratio at the end of 2024Q1 was 51.42%, up 1.58pct year-on-year.
Pumped energy storage is booming and nuclear power is being built at an accelerated pace, and the company's orders have welcomed a new round of growth. 1) Savings: In 2023, the company won the bid for 4 350 MW pumped storage power plant projects in Songyang, Zhejiang, with a total bid amount of 822 million yuan; the company is building 15 sets/year hydropower equipment production capacity, and capacity expansion provides battery life for revenue growth. 2) Nuclear power: New orders of 1.23 billion yuan were signed in 2023. The subsidiary Huadu Company is one of the main designers and manufacturers of control rod drive mechanisms for domestic nuclear reactors. In the context of the national approval of the construction of 6 nuclear power unit projects, the company's nuclear power business is expected to open up room for subsequent growth.
The company's hazardous waste recycling production capacity is 1.75 million tons. The recent rise in copper and other metal prices is expected to increase the company's 2024Q2. Net profit due to mother for 2024-2026 is estimated to be 12.9/14.1/1.48 billion yuan, respectively, corresponding to PE 13.6x, 12.4x, and 11.8x, maintaining an “increase in holdings” rating.
Risk warning
1. Metal price fluctuation risk; 2. Policy risk.