2022 results are slightly below our expectations
The company announced its 2022 results: revenue of 10.255 billion yuan, up 7.2% year on year; Guimu's net profit was 487 million yuan, up 5.2% year on year. Due to the impact of the epidemic and raw material prices, the company's performance in '22 was slightly lower than our expectations.
On a semi-annual basis, 1H/2H22 achieved revenue of 5.227/50,028 billion yuan respectively, an increase of 11.7%/2.9%, respectively; the net profit of its mother was 267/219 million yuan respectively, an increase of 7.3%/2.8%, respectively.
Development trends
Aluminum packaging led to a steady increase in the company's overall revenue. The company's revenue increased 7.2% in '22. By business, 1) Tinplate Packaging: Revenue in '22 was 4.213 billion yuan, -5.6% year on year. The epidemic affected the aerosol can and steel drum business revenue, but milk powder cans achieved a relatively rapid increase of 9.4% over the same period last year. 2) Aluminum packaging: Revenue in '22 was 5.368 billion yuan, +20.3% year on year. 3) Plastic packaging: Revenue in '22 was 674 million yuan, +5.1% year on year. The proportion of food and beverage customers increased, and the customer structure was further optimized. By region, domestic sales and export revenue in '22 increased by +8.2%/-5.1%, respectively, to $95572/683 million.
Profitability is under pressure. The company's gross margin in 2022 fell 1.4ppt to 12.5% year on year. Among them, the gross margin of tinplate packaging, aluminum packaging and plastic packaging was +0.7/-3.1/-4.0ppt to 12.4%/12.4%/13.8%, respectively. We think it was mainly affected by raw material prices. In terms of period expenses, the company's sales/management expenses ratio decreased by 0.4/0.3 ppt to 3.84%/4.20% year-on-year in 2022, respectively, and cost reduction and efficiency continued to advance. Thanks to factors such as good cost control and exchange rate changes, the company's net interest rate to the parent in 2022 fell slightly by 0.1ppt to 4.7% year-on-year.
Pay attention to the recovery in demand and the construction of the company's new production capacity. The 2022 epidemic has had a great impact on demand in downstream food and beverage, chemical and other industries. We believe demand is expected to recover significantly in 2023. Furthermore, in the medium to long term, we believe that with the increase in the canning rate of beverages and the increase in the company's market share, the company's product sales are expected to continue to grow steadily. The company also followed industry trends to carry out endogenous expansion of production capacity and external mergers and acquisitions, and new production capacity in Belgium, Shenyang, Chengdu, etc. progressed smoothly. Follow-up recommendations actively focus on the recovery in demand and the construction of new production capacity by the company.
Profit forecasting and valuation
Considering the impact of fluctuations in raw material prices on product pricing, the 2023 revenue was lowered by 6.7% to 11.56 billion yuan, keeping the 2023 EPS unchanged; introducing the 2024 profit forecast, we expect the company's 2024 EPS to increase by 7.7% to 0.60 yuan. The current stock price corresponds to 2023/2024 by 6.7/6.0 times P/E, respectively. Maintain a neutral rating, consider the valuation switch, and raise the target price by 14% to HK$4.30, corresponding to 2023/2024 by 7.8/7.2 times P/E, respectively. There is room for 1% decline from the current stock price.
risks
Prices of raw materials fluctuated greatly; competition in the industry intensified; construction of new production capacity fell short of expectations.