Core views:

Net profit to mother increased 16% and 41% year-on-year respectively in '23 and 24Q1. Profitability increased steadily, and overseas market performance exceeded expectations. According to Jiuli Hi-Tech's 2023 annual report and 2014 quarterly report, revenue for 23 was 8.6 billion yuan, up 31% year on year, and net profit to mother was 1.5 billion yuan, up 16% year on year. 24Q1 revenue was 2.4 billion yuan, up 42% year on year, and net profit to mother was 300 million yuan, up 41% year on year. Overseas revenue surged 84% year-on-year to 2.9 billion yuan in '23. Overseas business revenue and gross profit accounted for 34% and 44% respectively. Overseas market performance in '23 exceeded expectations and increased full-year results.

With a multi-point layout of high-end products, the overseas subsidiary received 4.6 billion yuan pipeline steel pipe orders, helping to increase its performance steadily over 24-25 years. According to the company's 2023 annual report, the company currently has an annual production capacity of 200,000 tons of finished industrial pipes (including stainless steel pipes, composite pipes and some special carbon steel pipes), 15,000 tons of pipe fittings, and 26,000 tons of alloy materials. In terms of products, in '23, EBK, a wholly-owned overseas subsidiary, signed a contract for the supply of pipeline steel pipes with a total length of about 92 kilometers with the Abu Dhabi National Petroleum Company. The total contract price (tax included) was about 592 million euros (discount of RMB 4.6 billion). The contract period reached 25M9, and 23M10 received an advance payment of about 1.4 billion yuan. Taken together, the transformation of the energy structure has created multiple opportunities. Internal and external demand resonates with oil well pipes, and nuclear power pipelines establish a long-term strategic fulcrum. The company is leading the scale and technology of products such as oil well pipes and nuclear power pipes. At the same time, it is increasing production of products such as high-end oil well pipes and supporting alloy materials, and is steadily expanding the global high-end market.

Profit forecasting and investment advice. The company's 2024-2026 EPS is expected to be 1.80/2.08/2.26 yuan/share, corresponding to the closing price on April 29, 2024-2026, and the 2024-2026 PE is 13/12/11 times. The valuation level of comprehensive companies and peer companies, and the company's profitability is superior to that of comparable companies. It is expected that future profit increases will repair the valuation. We gave the company 15 times PE in 2024, corresponding to a reasonable value of 26.97 yuan/share, maintaining the company's “buy” rating.

Risk warning. The risk of large fluctuations in global oil prices and energy investment. Domestic oil exploration and extraction efforts fell short of expectations. The construction of additional production capacity fell short of expectations.