LK(SH:600388) Guotai Junan Securities·2024-03-24 16:00Investment Rating - The report maintains a "Buy" rating for the company, with a target price set at 18.41 yuan, indicating a potential upside of 48% from the current price of 12.44 yuan [3][28]. Core Insights - The company's performance met expectations after excluding the impact of goodwill impairment, with a significant improvement in operating cash flow and a robust order backlog in the environmental protection sector [3][9]. - The report highlights a decline in net profit by 37% year-on-year, primarily due to a one-time goodwill impairment of 361 million yuan, while the revenue decreased by 8% to 10.973 billion yuan [7][21]. - The company is advancing its new energy business, with significant projects in the pipeline, including a 2GWh energy storage battery production line and a 5GWh lithium iron phosphate battery project [15][22]. Summary by Sections Financial Performance - The company reported a revenue of 10.973 billion yuan in 2023, down 8% year-on-year, with a net profit of 5.09 billion yuan, reflecting a 37% decline [7][21]. - The gross profit margin improved slightly to 23.68%, indicating stable profitability despite the revenue drop [7][29]. Order Backlog and Business Development - The company secured new environmental engineering contracts worth 10.287 billion yuan in 2023, a 5% increase year-on-year, with a total backlog of 18.51 billion yuan [9][23]. - The report notes a shift in the order structure, with a significant portion of new contracts coming from the power industry, benefiting from policy support and demand for upgrades [9][23]. Cash Flow and Management - The operating cash flow for 2023 was 1.706 billion yuan, a substantial increase of 104% year-on-year, reflecting improved cash management practices [37][24]. - The company has focused on enhancing cash flow management and reducing accounts receivable risks, leading to better quality of operating profits [37][24]. Future Outlook - The report projects a decrease in net profit for 2024 and 2025, with estimates of 1.414 billion yuan and 1.705 billion yuan respectively, while predicting a recovery in 2026 with a net profit of 2.107 billion yuan [38][39]. - The company is expected to continue its strategic focus on the new energy sector, with ongoing projects and a positive long-term outlook despite current market challenges [15][22].