Xiamen Guomao has released the 2023 annual report and the first quarter report of 2024:

In 2023, the company achieved operating income of 468.247 billion yuan, a year-on-year decrease of 10.29%; net profit to mother of 1.915 billion yuan, a year-on-year decrease of 46.72%; net cash flow from operating activities was 3.296 billion yuan, up 775.98%; basic earnings per share was 0.64 yuan, a year-on-year decrease of 54.29%; and a weighted average return on net assets was 6.65%, a year-on-year decrease of 8.72 percentage points.

In Q4 2023, the company achieved operating income of 67.531 billion yuan, down 42.59% year on year and 47.57% month on month; net profit to mother was 49 million yuan, down 96.16% year on year and 82.83% month on month.

In Q1 2024, the company achieved operating income of 96.88 billion yuan, a year-on-year decrease of 21.60% and a month-on-month increase of 43.46%; net profit to mother was 410 million yuan, a year-on-year decrease of 44.50% and a year-on-year increase of 733.64%.

Supply chain management business: Revenue declined year-on-year, and gross margin increased. In 2023, the company's supply chain management business achieved revenue of 465.295 billion yuan, a year-on-year decrease of 7.93%, mainly affected by factors such as the complex and severe international environment, rising uncertainty, insufficient effective domestic demand, and weak social expectations; achieved overseas revenue of 65.60 billion yuan, achieving a total import and export volume of 17.164 billion US dollars; the scale of trade along the “Belt and Road” exceeded 100 billion yuan, an increase of about 8% over the previous year; and the scale of trade with RCEP countries exceeded 97 billion yuan, an increase of about 4% year on year. In 2023, the gross margin of the company's supply chain management business was 1.31%, an increase of 0.04 percentage points over the previous year; combined with futures hedging profit and loss, the comprehensive gross margin rose to 1.47%. In terms of cargo volume, in 2023, the company's sales volume in the metals and metal minerals, energy and chemical industries, agriculture, forestry, animal husbandry and fishing sectors was -12.65%, 21.47%, and -3.02% year-on-year, respectively. Among them, steel business volume increased by more than 20% year on year, coal sales volume increased by more than 30% year on year, and sales volume in oil, cotton, cotton yarn and other categories increased by about 50%. At the same time, the company continues to optimize the product structure and expand high-value-added categories.

Health technology business: Actively cultivate and expand to accelerate industrial layout. The company's health technology sector focuses on the core business of medical devices, with upstream medical devices as the main investment layout direction, and collaboratively developing supporting industries such as old-age services, health care big data, and health services. In 2023, the company's health technology business achieved revenue of 737 million yuan, an increase of 64.82% over the previous year; gross margin increased 18.29 percentage points. The company completed the acquisition of Beijing Pelte Medical Technology Co., Ltd., a leading provider of overall solutions for minimally invasive surgery in China, and deepened investment, mergers, acquisitions and joint ventures in the field of minimally invasive medical care around Pelter Healthcare. In 2023, Pelter Healthcare gave full play to its technical advantages and international development advantages in minimally invasive surgical products. The business development momentum was good, achieving annual revenue of 506 million yuan, an increase of 20% over the previous year; net profit of 75.96 million yuan was achieved, an increase of 80% over the previous year.

The dividend ratio has increased, and emphasis is placed on shareholder returns. In 2023, the company plans to pay a cash dividend of 0.5 yuan (tax included) per share. The cash dividend to be distributed accounts for 57.56% of the net profit attributable to shareholders of listed companies, an increase of 17.70 percentage points compared to the previous year's cash dividend as a proportion of net profit attributable to shareholders of listed companies; based on the closing price of 7.38 yuan on April 30, 2024, the estimated dividend rate is about 6.8%.

Profit forecast, valuation and investment rating: Considering that industry demand is still under pressure, the company is expected to achieve net profit of 22.11 billion yuan, 25.03 billion yuan, and 2,882 billion yuan in 2024-2026 (the previous forecast values for 2024-2025 were 36.31 billion yuan and 4.196 billion yuan respectively, adding profit forecasts for 2026), earnings per share were 1.00, 1.14, and 1.31 yuan, respectively. The current stock price is 7.38 yuan. The corresponding PE is 7.4X/6.5X/5.6X, maintaining the “buy” rating.

Risk warning: risk of deterioration of the macroeconomic environment, risk of falling commodity prices, risk of increasing bad accounts receivable, risk of demand falling short of expectations, risk of business development falling short of expectations, risk of untimely use of information and data updates.