Description of the event
The company achieved operating income of 4.427 billion yuan in the first quarter, a year-on-year decrease of 11.77%; attributable net profit of 203 million yuan, an increase of 1.12%; and net profit after deduction of 87 million yuan, a year-on-year decrease of 38.79%.
Incident comments
Production increased slightly year on year, and the production and sales rate is expected to decline year on year, leading to a year-on-year decline in revenue scale. Production in the first quarter of 2024 was 918,000 tons, up 0.1% year on year. Assuming an 85% production and sales rate, the corresponding sales volume was 780,000 tons, down 7% year on year, which ultimately led to an 11.8% year-on-year decline in revenue. The larger decline in revenue is mainly due to the year-on-year decline in steel prices.
Gross profit per ton: Gross profit per ton improved year on month in the first quarter, achieving a gross profit of 601 yuan per ton, an increase of 48 yuan over the previous year, and an increase of 27 yuan over the previous month. Looking further, while the price of a ton fell by 299 yuan year on year, the cost of a ton fell by 348 yuan, which is the main reason for the increase in gross profit per ton. It is determined that the proportion of products such as heavy steel with optimized product structure, strong profitability, and relatively complex structure has increased. Tonnage costs: Tonnage costs have increased. In Q1, the tonnage cost was 408 yuan, an increase of 130 yuan over the previous year, and an increase of 13 yuan over the previous year. Financial expenses per ton and ton management expenses increased month-on-month. Q1 was 96 yuan and 81 yuan respectively, up 45 yuan and 6 yuan month-on-month. The cost of R&D per ton decreased slightly from month to month, but it is still high. Q1 was 201 yuan/ton. Tonnage is not:
There was no decline in the 2024Q1 tonnage buckles. The tonnage buckles were not 112 yuan, a year-on-year decrease of 58 yuan, and a month-on-month decline of 29 yuan.
The gross margin increased at the same time as the cost ratio, and R&D expenses increased significantly. The company's comprehensive gross profit margin for the first quarter was 10.59%, up 1.34pct year on year. In terms of cost ratio, the main reason was the year-on-year increase of R&D expenses. Among them, sales, management, R&D and finance expenses changed 0.04, 0.12, 2.02, 0.36pct to 0.51%, 1.44%, 3.54%, and 1.70% year-on-year respectively. Taken together, the net interest rate attributable to the company in the first quarter was 4.59%, up 0.59pct year on year. 1.98%, a year-on-year decrease of 0.87pct.
Non-financial aspects: 2024Q1 was 116 million yuan, an increase of 58 million yuan over the previous year, resulting in a negative net profit growth rate after Q1 deduction. The company disclosed some government subsidies. The company disclosed some government subsidies. According to the time of receipt of the subsidy and disclosure period, 2024Q1 was 137 million yuan and 57 million yuan, respectively, and 2023Q1 was 107 million yuan and 67 million yuan respectively, which also confirmed the year-on-year increase in government subsidies.
In terms of cash flow, cash inflows narrowed in the first quarter. The company's net cash flow from operating activities in the first quarter was 84 million yuan, a year-on-year decrease of 84 million yuan. The number of accounts receivable turnover days increased by 17.30 to 55.80 days over the same period last year.
Automation applications are gradually maturing, and long-term cost reduction and efficiency can be expected. At present, the company's top ten production bases have put into use a small number of Honglu lightweight intelligent welding robots and the company's own ground-mounted teaching-free intelligent welding workstations, laying the foundation for the company's next step to increase production capacity, improve product quality, and reduce costs through intelligence. Compared with traditional flame cutting methods, laser cutting machines have obvious advantages in speed and accuracy. Under ideal conditions, compared to flame cutting, laser cutting can save 50-80 yuan/ton per ton of steel; at the same time, if subsequent companies achieve automated breakthroughs in the field of welding, further cost reductions can be expected.
Continuing to be optimistic about the high increase in production and sales due to the company's increased market share, and the further advancement of cost reduction in the context of increased automation. The continuous improvement in gross profit per ton shows positive factors, and it is expected that the increase in ton costs will gradually be digested in the future. Optimistic about the company's core competitiveness and long-term growth, the company is expected to achieve net profit of 12.77, 14.71, and 1,727 billion yuan in 2024-2026, corresponding to the current closing price PE of 9.96, 8.65, and 7.37 times, respectively, to maintain a “buy” rating.
Risk warning
1. Downstream demand fluctuation risk; 2. Raw steel price fluctuation risk.